This website including the ‘[EduFund]’ platform is owned, operated and maintained by Helena Edtech Private Limited, a company incorporated under the laws of India. The platform and the services thereunder are provided on an "as is" basis. Use of the service and the platform is at your own risk. Company makes no warranty that the use of the service and the platform will be continuous, uninterrupted, bug-free, error-free, virus-free, free of defects, free of technical problems, nor that it will meet all of your needs. To the extent permitted by applicable law, Company expressly disclaims all other warranties, conditions, results, guarantees, or representations with respect to the service and the platform, whether express or implied, including, but not limited to, the implied warranties of merchantability, merchantable or satisfactory quality, fitness for a particular purpose, non-infringement of third party rights, or arising from the course of performance, course of dealing, or usage of trade.
Investment in securities market are subject to market risks, read all the related documents carefully before investing. The valuation of securities may increase or decrease depending on the factors affecting the securities market.
EduFund and the EduFund App are the brand and product of Helena Edtech Private Limited
“An affiliate of the Company, i.e. Samyama Advisors Private Limited, is registered with the Securities and Exchange Board of India (SEBI) as an investment adviser under the SEBI (Investment Advisers) Regulations, 2013 bearing the registration number [INA000015321]. Samyama Advisors Private Limited may provide investment advice to the clients through the Company's platform.”
Registered Address: 30, Omkar House, Near Swastik Char Rasta, Navrangpura, Ahmedabad Gujarat, India – 380009
Transaction Platform Partner : BSE Star MF (with Member code-51573). CIN No: U67100GJ2020PTC112589. RIA Number: INA000015321 GST No: 24AAFCH2122L1ZU
Please scan QR code to download the EduFund app
Equity ETFs that don’t do what you think they do
“Man is not what he thinks he is; he is what he hides.” ― André Malraux.
Similar is the case with our ETFs. ETFs are not what they seem to be. Several ETFs are named similarly, which is often deceptive to a layman investor.
Investors must evaluate a variety of variables while choosing the right ETF. ETFs’ costs, tracking, structure, and liquidity are all critical. Even with these factors in place, an ETF’s results primarily depend on the underlying assets at the end of the day.
This article aims to help the investor know the nitty-gritty of the ETF nomenclature and why an investor should not go by just the name of the ETF and should also check under the hood.
Let’s take an example and understand why this is the case. Let’s take 2 ETFs tracking the emerging markets:
Country-wise holdings:
Sectoral weightage:
The above two funds are very similar, yet they are slightly different and have given separate returns over the same period. The two funds track the emerging markets and also follow the same market classification given by MSCI.
Still, they have different tracking indices, which differ very slightly. As seen above, IEMG tracks the MSCI Emerging Markets Investable Market Index, and the EEM tracks the MSCI Emerging Markets Index, which are two different indices with almost the same name!
The case was not very severe in our example; what if the two ETFs tracking very similar markets gave drastically different returns?
Frontier markets made a big impression in 2013, outpacing the BRICs and other developing markets by a wide margin. Frontier markets are developing-world capital markets that are less developed.
Because it is too tiny, has too much inherent risk, or is too illiquid to be termed an emerging market, a frontier market is a country that is more established than least developed countries (LDCs) but yet less established than emerging markets. Pre-emerging markets are another name for frontier markets.
The iShares Frontier 100 ETF (FM) and the Guggenheim Frontier Markets ETF are the two broad frontier market ETFs currently available (FRN).
You’d believe they’re the same fund because they both
claim to have broad exposure to frontier markets.
However, if you had invested in the wrong one, you would have had no idea that frontier markets performed well in 2013. FM returned over 25% in 2013, whereas FRN returned -13 %. That’s a 38 percent difference in returns between the two funds!
FRN uses the BNY Mellon classification system and is only allowed to retain depositary receipts. As a result, the underlying basket gives you access to nations like Chile, Colombia, Egypt, and Peru, which account for more than 70% of FRN’s weighting, even though MSCI, FTSE, and S&P all classify them as emerging.
Meanwhile, FM adheres to MSCI’s classification system and is authorized to hold local securities – this gives FM a preference for Saudis like Kuwait, Qatar, and the United Arab Emirates, as well as African nations like Nigeria and Kenya.
The lesson here is to not assume that a fund will cover a country, sector, location, or theme precisely as you think based on its name. Checking under the hood is the key!
Consult an expert advisor to get the right plan for you