Reliance launches Banking ETF

The Reliance AMC has launched a banking ETF (Exchange Traded Fund). The launch comes as a surprise because the AMC already runs the largest actively managed banking mutual fund called Reliance Banking that has an AUM of Rs. 938 crore. Though Reliance Banking as done well with a total return of 41 per cent per annum, the fund has barely managed to beat its benchmark in its 5-year life.

ETFs are like Index funds which trade on the market like shares where customer can buy and sell the bankin index. The Reliance Banking ETF will deliver returns exactly like the banking Index, but minus the expenses. Like any index fund, the fund will have lower expense.

This fund will track the CNX Bank Index, which has 12 liquid and large Indian banking stocks. Since inception, its return has been 27 per cent on an average. As on April 30, 2008, its constituents included -- State Bank of India (27.85 per cent), ICICI Bank (24.3 per cent), HDFC Bank (13.43 per cent), Axis Bank (8.21 per cent), Kotak Mahindra Bank (6.78 per cent), Bank of India (4.47 per cent), Punjab National Bank (4.31 per cent), Bank of Baroda (2.85 per cent), Canara Bank (2.42 per cent), Union Bank of India (2.01 per cent), IDBI (1.88 per cent) and Oriental Bank (1.36 per cent).

The scheme's asset allocation will be 90 per cent in the equities of its Index and rest 10 per cent in other equities or debt instruments.

Similar Funds
This will be the second ETF to track a bank index. The first was Benchmark's Banking BeES, which has delivered 36 per cent return since its launch in May 2004. There are two relatively new ETFs as well, which track the PSU Bank Index - Kotak PSU Bank ETF and PSU Bank BeES.


Scheme Details:
Issue Opening Date : May 12, 2008
Issue Closing Date : May 30, 2008
Fund Category : Exchange Traded Fund
Fund Type : Open-end, Exchange traded
Benchmark : CNX Bank Index
Cost : The fund has 2.25% entry load during NFO. Investors will incur brokerage on sale and purchase after listing of the ETF inline with the brokerage that the broker will normally charge.
Minimum Investment : Rs 5000(During the NFO)