Nippon India Passive Flexicap FoF Review

Published: September 6, 2021 at 8:24 am

Last Updated on December 29, 2021

Nippon India Passive Flexicap FoF is an open-ended Fund of Funds (FoF) Scheme investing in units of ETFs/Index Funds of Nippon India Mutual Fund. In this review, we consider if it makes sense to invest in such a product.

The FoF was launched in Dec 2020 and currently has an AUM of 212 crores (as of 31st July 2021). The directly plan currently has an expense ratio of 0.06% over and above the expensed ratios of the underlying funds.

Nippon India Passive Flexicap FoF has a broad investment mandate. It can invest 95 – 100% units of Nippon India ETFs/ Index Fund of Nippon India Mutual Fund. The scheme information document says that the asset allocation among these underlying funds will be based on the average allocation of all active Multicap Funds in the industry into large, mid and small cap stocks as provided by CRISIL every month. The rebalancing will also be done monthly.

Screenshot from Nippon India Passive Flexicap FoF product presentation representing its investment strategy
Screenshot from Nippon India Passive Flexicap FoF product presentation representing its investment strategy

On the face of it, this looks like a good one-fund portfolio product at a low cost. That is, you don’t need to buy large cap, mid cap and small cap index funds. However, as always, deeper scrutiny paints a different picture.

Get free money management solutions delivered to your mailbox! Subscribe to get posts via email!

    🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

    The portfolio holdings of Nippon India Passive Flexicap FoF since inception is tabulated below.

    MonthNippon India ETF Nifty 100Nippon India ETF Nifty Midcap 150Nippon India Nifty Smallcap 250 Index Fund

    As of July 31st 2021, Nippon India ETF Nifty 100 only has assets of 165 crores. So Nippon India Passive Flexicap FoF is holding 68% of this AUM! Even a casual glance at the Nifty 100 ETFs, Value Research page would reveal significant price-nav deviations.

    If the influx into the FoF is large, the AMC will direly buy ETF units at its NAV. However, the influx on most days would be unremarkable, and therefore the FOF will be buying ETF units at market price.

    Then the tracking errors have to be considered. We have already pointed out that (1) ETF tracking errors have to be measured wrt price and not NAV. For example, the ETF price return (absolute) bet Jan 4th 2021 and Sep 3rd 2021 is 31.50%, while the change in NAV is 23.84% and the change in NIfty 100 TRI is 24.40%. Nippon India Passive Flexicap FoF is susceptible to this tracking error. Also, see ETFs vs Index Funds: Stop assuming lower expenses equals higher returns!

    (2) We have also pointed out that the tracking errors for midcap and smallcap index funds or ETFs can be quite high: Not all index funds are the same! Beyond top 100 stocks tracking errors are huge! Over the past nine months, the MIdcap ETFs NAV return was 05% lower than its index. The ETF price return is likely to have a higher deviation. The Smallcap index fund lost 1.75% compared to its index due to tracking error.

    Nippon India Passive Flexicap FoF seems more like a channel to gather some AUM for the underlying ETFs and index funds than a reasonable investment option. Even if we ignore the 0.06% expense ratio of the FOF direct plan, the underlying funds’ price-NAV deviations and tracking errors are enough reasons to avoid this.

    We, therefore, recommend that investors avoid the Nippon India Passive Flexicap FoF and any other midcap or small cap passive options. They are better off combining Nifty & Nifty Next 50 funds to create large, mid cap index portfolios.

    Do share this article with your friends using the buttons below.

    🔥Enjoy massive discounts on our courses and robo-advisory tool! 🔥
    Use our Robo-advisory Excel Tool for a start-to-finish financial plan! More than 1000 investors and advisors use this!
    New Tool! => Track your mutual funds and stocks investments with this Google Sheet!
    • Follow us on Google News.
    • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
    • Join our YouTube Community and explore more than 1000 videos!
    • Have a question? Subscribe to our newsletter with this form.
    • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

    Get free money management solutions delivered to your mailbox! Subscribe to get posts via email!

      Explore the site! Search among our 2000+ articles for information and insight!

      About The Author

      Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
      Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
      Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
      Our new book for kids: “Chinchu gets a superpower!” is now available!
      Both boy and girl version covers of Chinchu gets a superpower
      Both boy and girl version covers of Chinchu gets a superpower.
      Most investor problems can be traced to a lack of informed decision-making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it and teach him several key ideas of decision making and money management is the narrative. What readers say!
      Feedback from a young reader after reading Chinchu gets a Superpower (small version)
      Feedback from a young reader after reading Chinchu gets a Superpower!
      Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
      Buy the book: Chinchu gets a superpower for your child!
      How to profit from content writing: Our new ebook for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
      Want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
      We publish monthly mutual fund screeners and momentum, low volatility stock screeners.
      About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
      Connect with us on social media
      Our publications

      You Can Be Rich Too with Goal-Based Investing

      You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
      Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

      Your Ultimate Guide to Travel

      Travel-Training-Kit-Cover-new This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)