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  1. 1. Junior B e ES Turning Nifty Junior into A Share
  2. 2. <ul><li>Second Exchange Traded Fund (ETF) from Benchmark Asset Management Company Pvt. Ltd. </li></ul><ul><li>Combination of a share and a mutual fund unit </li></ul><ul><li>Real-time Trading on NSE after the listing </li></ul><ul><li>Will be available across 4000 NSE terminals in 400 cities </li></ul><ul><li>Tracks the CNX Nifty Junior Index (Currently no other index funds available on this index) </li></ul><ul><li>Priced at 1/10 th of the CNX Nifty Junior Index </li></ul>Introduction to Junior B e ES
  3. 3. <ul><li>Directors of Trustee Co. </li></ul><ul><li>Dr. S.A. Dave Dr. Manesh Shrikant </li></ul><ul><li>Dr. Pravin P Shah </li></ul><ul><li>Mr. Dakshesh Dhruv </li></ul><ul><li>AMC Directors </li></ul><ul><li>Mr.Dhirubhai Mehta </li></ul><ul><li>Mr. Sevantilal Parekh </li></ul><ul><li>Mr. Shripad Halbe </li></ul><ul><li>Ms. Susan Thomas </li></ul><ul><li>Mr. T.N.V. Ayyar </li></ul>About Benchmark <ul><li>First AMC in India with focus on passive and quantitative asset management </li></ul><ul><li>First AMC in Asia (ex Japan) to launch ETF, and only18th in the world </li></ul><ul><li>Launched the first ETF in India – Nifty BeES </li></ul><ul><li>Run by a team of professionals with vast experience in companies like Merrill Lynch, CRISIL, Salomon Smith Barney, etc. </li></ul>
  4. 4. About Nifty B e ES: India’s First ETF <ul><li>Listed on NSE and trading real-time since January 8, 2002 </li></ul><ul><li>Recorded the lowest tracking error since launch (0.12%) amongst all the index funds in the country </li></ul><ul><li>Maximum Premium/Discount to NAV has been between +&-0.5% (Source: Business Standard) </li></ul><ul><li>Average Daily Traded Volume (as of Dec 31, 2002): 23,400 units </li></ul>“ Nifty BeES seems the best index fund when it comes to all three parameters; Entry loads, Expense ratios and Tracking Error.It is India’s first and only Exchange Traded Fund or simply put, a next generation index fund.” - Business World, September 30, 2002 “ Investing in Nifty BeES is a comparatively better method of participating in any market rally” - The Economic Times, December 2, 2002
  5. 5. About CNX Nifty Junior Index <ul><li>Scientifically developed index managed by IISL (NSE) </li></ul><ul><li>Consists of the next rung of liquid securities after S&P CNX Nifty </li></ul><ul><li>CNX Nifty Junior was introduced on Jan. 1, 1997, with base date and base value being November 03, 1996 and 1000 respectively </li></ul><ul><li>Selection of the index set is based on two criteria: </li></ul><ul><ul><li>Liquidity (Impact Cost) </li></ul></ul><ul><ul><li>Market Capitalization </li></ul></ul><ul><li>Nifty Junior often acts as incubator for the stocks eligible for Nifty i.e. most of the stock included in Nifty are from Junior Nifty but this is not true other way around </li></ul>
  6. 6. S&P CNX Nifty Vs. CNX Nifty Junior 1.97% 1.69% Volatility (of Daily Returns) 3.19 2.40 Dividend Yield 1.05 2.83 Price to Book 12.26 14.83 P/E Ratio 35,668 352,943 Market Cap (in Rs. Crores) Junior Nifty (As on Dec. 31, 2002)
  7. 7. S&P CNX Nifty Vs. CNX Nifty Junior (cont…)
  8. 8. S&P CNX Nifty Vs. CNX Nifty Junior (cont…) Nifty Junior is a ‘higher risk higher return’ index than Nifty
  9. 9. S&P CNX Nifty Vs. CNX Nifty Junior (cont…) Nifty Junior is a ‘higher risk higher return’ index than Nifty
  10. 10. <ul><li>IPO Start Date: February 6, 2003 </li></ul><ul><li>IPO End Date: February 14, 2003 </li></ul><ul><li>Minimum application: Rs. 10,000 </li></ul><ul><li>Additional application: Multiples of Rs. 1,000 </li></ul><ul><li>Allotment Price: 1/10 th of the CNX Nifty Junior Index as on the date of allotment </li></ul>Junior B e ES IPO
  11. 11. <ul><li>First ETF came in 1993 on S&P500 called SPDRs </li></ul><ul><li>SPDRs and QQQs (ETF on Nasdaq 100) are the most actively traded ETFs </li></ul><ul><li>Globally, there are currently 280 ETFs with 361 listings on exchanges around the world </li></ul><ul><li>On November 29 , 2002 the ETF market globally was $142 billion ( Source: MSDW ) </li></ul><ul><li>ETFs launched across the world include Japan in September 2001 and in Korea and Singapore in 2002 </li></ul><ul><li>Nearly 60% of trading volumes on American Stock Exchange comprises of ETFs </li></ul>History of ETFs
  12. 12. Growth of ETFs Source: Bloomberg, Morgan Stanley Research
  13. 13. How Junior B e ES work Secondary market Seller Buyer NSE Junior BeES Cash Junior BeES Cash Primary market Buy / sell Market making / Arbitrage Fund Authorised Participants / Financial Institutions Creation in-kind Redemption in-kind
  14. 14. Index tracking – a long term winner <ul><li>It has been proved that It is not possible to consistently outperform the overall stock market </li></ul><ul><li>In the last 20 years, 85% of actively managed funds have under performed the S&P 500 in US </li></ul><ul><li>Due to this, approximately 25% of the invested assets in the U.S. is indexed </li></ul><ul><li>Index tracking is relatively a cheaper strategy to implement </li></ul><ul><li>Indices are dynamic, transparent and have high investor recall </li></ul><ul><li>No fund manager risk, but pure equity market exposure </li></ul>
  15. 15. Index tracking – Indian Scenario Source: 36% 12 36% 9 No. of funds beating Nifty on Risk Adjusted Return 46% 15 40% 10 No. of funds beating Nifty on Pure Performance 33 25 Total Number of Funds considered One Year 01-04-01 to 31-03-02 Three Year 01-04-99 to 31-03-02
  16. 16. <ul><li>Simple – Can be bought/ sold on NSE like a share…real-time </li></ul><ul><li>Economical – No load scheme. Annual expense ratio including management fees is a maximum 1% of the daily average net assets. One of the lowest for any mutual fund scheme in India. </li></ul><ul><li>Diversification – It’s a cost efficient way to invest in a basket of some of the most liquid mid-cap securities </li></ul><ul><li>Equitable Structure – Long term investors insulated from short term trading activity </li></ul><ul><li>Transparent – Investors have access to information on the portfolio constituents represented represented on a daily basis </li></ul>Junior B e ES Advantages
  17. 17. Junior B e ES vs. Open ended Index funds Does not insulate long term investors from short term investor activity Insulates long term investor from short term trading activity Structure Fund Fund / Stock market Liquidity Daily Indicative Real time NAV Average Best Tracking No Yes Ability to lend units No Yes Hedging Tool No Yes Trade at any brokerage firm No Yes Low Expense Ratio No Yes Traded throughout the day Traditional Open Ended Index Funds Junior B e ES Attribute
  18. 18. THANK YOU