Flipkart co-founder Sachin Bansal’s Navi MF launches lowest cost index fund

Navi Mutual Fund, the financial services business started by Flipkart co-founder Sachin Bansal, has launched Navi Nifty 50 Index Fund. This is an open-ended equity scheme that would replicate the Nifty 50 Index, and the company claimed it as one with the lowest cost compared to any other index schemes in the passive funds category.

The 10-day new fund offer will open on July 3, 2021, and close for subscriptions on July 12, 2021. The investment objective of the scheme is to achieve returns equivalent to Nifty 50 Index by investing in stocks of companies comprising Nifty 50 Index, subject to tracking error, said a statement.

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The fund proposed to charge a 0.06 percent expense ratio for its direct plan offering, which it claims is the lowest in the index schemes category so far. For index funds, the category average expense ratio is 0.25 percent, and many existing index funds are charging expense in the range of 0.15 percent to 0.20 percent.

According to Navi, the new scheme would be suitable for investors who are seeking long-term capital appreciation, investment in securities covered by Nifty 50 Index, and access to the growth of market leaders.

Commenting on the new fund, Saurabh Jain, MD and CEO, Navi AMC Limited said,

“All funds have professional portfolio managers. With an index fund, investors don't need to pay more for getting the expertise to hand-pick stocks. The real benefit to the investor is brought by lowering the expense ratio while still providing the same quality professional portfolio management through index funds. Working with our partners and leveraging our technology background, Navi has lowered the cost to 0.06 percent for the direct plan offering, which is the lowest in the index schemes category, as of today.”

The launch of this low-cost index fund comes at a time when many AMCs have been steeply hiking their expense ratios. Incidentally, US markets have seen a huge growth in the passive space, with passive funds contributing to nearly 40 percent of AUM and the largest US AMC, Vanguard, focusing on providing low-cost investment options.