NFO review: Aditya Birla Sun Life Nifty Healthcare ETF

This is a brand new open-ended exchange traded fund tracking Nifty Healthcare TRI

Staff Writer   /   October 12, 2021

Aditya Birla Sun Life AMC has announced the launch of Aditya Birla Sun Life Nifty Healthcare ETF. It is an open-ended exchange-traded fund (ETF) that will track the Nifty Healthcare TRI (Total Return Index). The New Fund Offer (NFO) opened for subscription on October 8 and closes on October 20.

What’s special

Aditya Birla Sun Life Nifty Healthcare ETF offers exposure to top companies in the pharma and healthcare sector. It provides diversification across sub-sectors, through investment in pre-dominantly large-cap stocks. Importantly, it is an ETF which assures lower costs for investors compared to actively managed funds.

Investment objective

The objective of this scheme is to ride the opportunities in the healthcare sector and generate long-term capital growth for investors. The Aditya Birla Sun Life Healthcare ETF through the Nifty Healthcare Index, provides investors access to a well-diversified index and a sector that has demonstrated strong growth capabilities and is a critical part of the economy.

About the underlying index

The Nifty Healthcare Index comprises a maximum of 20 tradable, exchange-listed companies and has a well-diversified sub sector allocation. This includes companies from fields such as pharma, hospitals, medical devices and supplies, laboratories and diagnostics as well as medical insurance. The sub-sectors also include companies engaged in formulations, APIs, CRAMs and other healthcare services.

The index is constituted on a free-float market capitalization method and is reconstituted semi-annually. This index has significantly outperformed the broader market indices in recent years.

Fund-house speak

A. Balasubramanian, MD & CEO, Aditya Birla Sun Life AMC Limited said, “Healthcare has become one of India’s core sectors, in terms of revenue, exports and employment generation. This growth is reflected in the market performance of healthcare companies. The Nifty Healthcare Index has grown more than 9x from its base date vis-à-vis Nifty, which has grown 8x in the same period. It has generated double-digit returns in both short-term (3 years) and long-term (10 years).”

He adds, “As it is a passive fund, it minimizes the investing cost and need for stock selection, at the same time offering the benefit of share-like trading. The Healthcare ETF will be an easy way for investors to be a part of this sector’s growth journey.”

Healthcare sector outlook

It is increasingly being realised that the healthcare sector is the foundation of a healthy economy. As per NITI Aayog Report 2021, the total opportunity for growth in the pharma sector is from ₹4.84 lakh crore in 2021 to ₹12.88 lakh crore by 2030, driven by rising income, better health awareness, and increasing access to insurance, among others. Moreover, the Government of India aims to increase healthcare spending to 2.5% of the Gross Domestic Product (GDP) by 2025 and make India a global healthcare hub.

All this means that the healthcare sector is well-poised for a strong growth trajectory. And ABSL AMC’s Healthcare ETF provides investors an option to benefit from it in the long term. The minimum application amount for this fund is Rs 500 and in multiples of Rs 100 thereafter, during the NFO period.

Existing healthcare funds

The pharma/healthcare sectoral mutual fund category has 13 existing products and Aditya Birla Sun Life Nifty Healthcare ETF is the 14th one.

The biggest and most prominent ones are Nippon India Pharma, ICICI Pru Pharma Healthcare & Diagnostics, SBI Healthcare Opp, Mirae Asset Healthcare and DSP Healthcare.

The last 1 year returns of the category have been between 25-35 per cent. The 3 year trailing gains have been between 24-32 per cent CAGR. The 5 year gains have been in 10-16 per cent CAGR.

In the passive segment of the market, Aditya Birla Sun Life Nifty Healthcare ETF will compete with Nippon India Nifty Pharma ETF, Axis Healthcare ETF and Edelweiss MSCI Ind Domestic & World Healthcare 45 (overseas and domestic hybrid).

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