Zerodha Fund House (ZFH) has launched India’s first Growth Liquid ETF - Zerodha Nifty 1D Rate Liquid ETF. The new fund offer (NFO) will be available till January 12, 2024. The fund is expected to be listed on the NSE and BSE exchanges by January 24, 2024.
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The Zerodha Nifty 1D Rate Liquid ETF replicates the Nifty 1D Rate Index, which measures the returns generated by market participants lending in the overnight market.
The ETF primarily invests in TREPS (Treasury Bills Repurchase) traded on the CCIL (Clearing Corporation of India platform. As the investment is made in short-term debt products backed by treasury bills, it carries a relatively low credit risk and low-interest rate risk, the fund house said.
"The fund may facilitate a seamless transition between equity and cash within the same settlement, thereby facilitating better cash management and hence suitable for all types of investors," it said.
Vishal Jain, CEO, Zerodha Fund House said, “This new product from ZFH marks the arrival of liquid ETFs that offer a Growth NAV for the first time in India. This feature makes it easier to track the ETF's performance. Additionally, the returns are taxed only when the ETF is sold, as compared to daily dividends which are taxed continuously. To further enable more retail investors, the ETF will have a lower ticket size, starting with a NAV of 100”
The Index
The Nifty 1D Rate Index has been developed to measure the returns generated by market participants lending in the overnight market.
The index uses the overnight rate provided through the Tri-Party Repo Dealing System (TREPS) for the computation of index values.
Minimum application amount
The minimum application amount for the Zerodha Nifty 1D Rate Liquid ETF is ₹500 per application and in multiples of ₹100 thereafter.
Load structure
There's no entry load applicable to investors, aligning with Securities Exchange Board of India's (SEBI's) guidelines.
Additionally, the exit load remains nil, granting flexibility for investors seeking to divest their holdings.
Asset allocation
Under the normal circumstances, the asset allocation (% of net assets) of scheme’s portfolio will be as follows:
| Types of Instruments | Minimum Allocation (% of Total Assets) | Maximum Allocation (% of Total Assets) | Risk Profile |
|---|---|---|---|
| Tri-Party Repo on Government Securities or T-bills, Reverse Repo & Cash and Cash equivalents | 95% | 100% | Low |
| G-sec(s) and/or T-bills with a residual maturity of up to 30 days | 0% | 5% | Low |
(Source: Fund document)
Expenses
The Zerodha Nifty 1D Rate Liquid ETF incurs various expenses, which are essential for fund management and investor-related activities.
The estimated total expense ratio (TER), complying with Regulation 52 (6), can go up to 1.00% per annum. These expenses cover crucial aspects like investment management and advisory fees, trustee fees, audit fees, custodian fees, and marketing and selling expenses, among others.
Investment considerations
Zerodha Nifty 1D Rate Liquid ETF's focus on Tri-Party Repo on Government Securities or T-bills and its minimal credit and interest rate risks make it a decent choice, especially for those seeking low-risk short-term savings solutions.
Potential investors should conduct thorough research, evaluate their risk tolerance, and align their investment objectives with this offering's characteristics before making any investment decisions, experts say.
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