Mirae Asset S&P 500 Top 50 ETF, FoF: Gateway to US mega cap companies
There will be an ETF and a Fund of Fund (FoF) based on the S&P 500 Top 50 Index
If you ever wanted a a Nifty 50 like product covering US domiciled and listed Mega cap companies, your search ends here. Mirae Asset MF is launching two related products that will be based on the S&P 500 Top 50 index. One, Mirae Asset S&P 500 Top 50 ETF will be an open-ended scheme replicating/tracking S&P 500 Top 50 Total Return Index. Two, Mirae Asset S&P 500 Top 50 ETF Fund of Fund will be an open-ended fund of fund scheme predominantly investing in Mirae Asset S&P 500 Top 50 ETF. Let us find out more about them.
Mirae Asset S&P 500 Top 50 ETF and Mirae Asset S&P 500 Top 50 ETF Fund of Fund will open for NFO subscription on September 1 and close on September 14/15. ETF listing on exchange will be within 5 working days from allotment.
What is mega cap
Mega cap is as per S&P method wherein S&P 500 stocks are considered as large cap and S&P 500 Top 50 stocks are considered as mega cap. The S&P 500 Top 50 index is a gateway to US mega cap companies.
The above index comprises top 50 mega cap companies which are perceived as sector leaders. It is considered that such a basket will lead to a relatively more stable portfolio of companies with lower risk and having advantage of scale. The companies on this list have strong brand reputation with products and services, thus creating economic moat.
S&P 500 Top 50 companies
In consumer staples, the index has Procter & Gamble, Coca-Cola, PepsiCo and Walmart.
In communication services, it has Walt Disney, Comcast, Facebook and Alphabet.
Amazon, Tesla and Nike are consumer discretionary plays.
Johnson & Johnson, Pfizer, Abbott Laboratories and Merck & Co are healthcare giants.
And in IT, you have Apple, Microsoft, Salesforce, Cisco and Oracle.
In fact, 20 companies forming part of S&P 500 Top 50 Index features among World’s Top Most 50 innovative companies across the world in 2021. Of these 13 companies are non-tech.
Data shows that S&P 500 Top 50 Index has outperformed the Nifty 50 Index with lower correlation. Also, S&P 500 Top 50 Index has outperformed S&P 500 Index and Nifty 50 Index on an absolute and risk-adjusted basis in periods greater than 1 year.
In fact, S&P 500 Top 50 Index has outperformed S&P 500 Index and Nifty 50 Index in 7 out of 11 calendar years & 8 out of 11 calendar years respectively (including 2021 CYTD).
What’s more interesting, the S&P 500 Top 50 Index has recorded a lower drawdown than the Nifty 50 Index in 8 out 11 calendar years.
Apart from being a single-click portfolio, Mirae Asset S&P 500 Top 50 ETF and Mirae Asset S&P 500 Top 50 ETF Fund of Fund products provide exposure to all sectors forming part of top 50 space unlike tech focused US passive or active funds. This should address the concerns of investors cautious about tech valuations.
The index itself can be called sectorally agnostic, which would cause lower volatility and risk historically, compared to tech/sector focussed funds. Also, data shows, the index has delivered higher returns than the S & P 500 index with a high correlation.
The beauty of the S&P 500 Top 50 Index is that it represents sector leading mega cap companies which capture around 40% of MSCI World Index. The index portfolio evolves as the market evolves.
The index is reconstituted and reviewed for constituent changes annually in June.
The index aims to capture the ever-changing market trend and reflect the current market leaders from each sector.
Investing in international funds
The Indian Rupee (INR) has historically depreciated against USD and EUR over the long-term; adding to investors’ returns. When INR depreciates the value of foreign asset increases and vice versa.
Also, lower correlation can lead to diversification of country risk. There is some data to show a low correlation between India and the USA.
In a nutshell, these products are an avenue to take low-cost exposure in the US market and also benefit from INR depreciation.