The Mirae Asset Nifty 1D Rate Liquid ETF, launched in July 2023, aims to deliver returns in line with the Nifty 1D Rate Index, which reflects overnight lending rates. This ETF invests in highly liquid, low-risk instruments like tri-party repos and government securities, making it ideal for investors seeking stability and daily liquidity rather than high returns. Here’s a breakdown of the fund’s key aspects:
Objective and Strategy
The ETF aims to provide stable income and low volatility by closely tracking the Nifty 1D Rate Index. The objective is to offer returns that mirror the index before expenses, ensuring investors get a close approximation of the overnight rate. Such funds generally cater to risk-averse investors who prioritize liquidity and minimal price fluctuation.
Performance and Yield
Since inception, the Mirae Asset Nifty 1D Rate Liquid ETF has delivered an annualized return of about 7.2%, outperforming its benchmark’s rate of around 6.3%. The ETF’s yield to maturity stands at approximately 6.7%, suggesting it’s well-suited for conservative investors seeking marginally higher returns than fixed deposits. However, this ETF remains sensitive to changes in the RBI’s policy rates, which influence overnight and repo rates.
Costs and Liquidity
With a competitive expense ratio of 0.28%, the ETF maintains cost efficiency, adding to its appeal as a low-risk investment option. Notably, it has no exit load, allowing investors the flexibility to redeem units without penalty. This structure is particularly beneficial for investors managing short-term cash needs who want to ensure easy access to funds without incurring additional charges.
Suitability
This ETF is ideal for retail investors looking for a place to park their surplus cash with quick accessibility. It suits those with a short investment horizon, such as a few days to a month, due to its liquidity and capital safety. However, it’s not designed for high returns, making it less suitable for growth-oriented investors seeking equity-like gains.
Key Considerations
While the Mirae Asset Nifty 1D Rate Liquid ETF is a sound low-risk option, investors should be aware of its limitations. The fund is sensitive to RBI rate cuts or hikes, and returns may vary slightly due to tracking errors. Furthermore, the focus on very short-term debt instruments means that returns can be modest compared to long-term investment options.
In summary, Mirae Asset Nifty 1D Rate Liquid ETF is an attractive choice for investors focused on liquidity and capital preservation with a low appetite for risk. It effectively balances ease of access with stable returns, making it a smart choice for short-term financial goals.
