Zerodha Nifty 8-13 Yr G-Sec ETF

What is the Zerodha Nifty 8-13 Yr G-Sec ETF?

It is an open-ended Exchange Traded Fund (ETF) that tracks/replicates the performance of the Nifty 8-13 Yr G-Sec Index. 

Who is this fund suitable for?

This ETF is suitable for investors seeking medium to long-term income and looking for an exposure to a portfolio of Indian government bonds that replicates/tracks  Nifty 8-13 Yr G-Sec Index. This ETF carries a Relatively High Interest Rate Risk and Relatively Low Credit Risk.

What does the "8-13 Yr" in the name signify?

It signifies that the fund invests in Indian Government Securities (G-Secs) with a  maturity ranging from 8 to 13 years.

What are the general tax implications of investing in this ETF?

Capital gains for this ETF shall be taxed at your applicable income tax slab rate irrespective of holding periods. Please consult a tax advisor for personalized advice.

What is the primary investment objective of this ETF?

The fund's objective is to provide returns that, before expenses, align  with the e total returns of the securities represented by the Nifty 8-13 Yr G-Sec Index, before expenses and subject to tracking error.

What is the benchmark index for this scheme?

The benchmark is the Nifty 8-13 yr G-Sec (Total Returns Index). 

How will the scheme's assets be allocated?

Under normal conditions, it will invest a minimum of 95% and up to 100% of its total assets in the Securities covered by Nifty 8-13 Yr G-Sec Index. The remaining portion, from 0% to 5%, might be allocated to debt and money market instruments, as well as cash and cash equivalents. .

How and when is the ETF's portfolio rebalanced?

The portfolio of the ETF is rebalanced under following circumstances:

In case of change in constituents of the index due to periodic review, the portfolio of the scheme shall be rebalanced within 7 calendar days. 

In case the rating of any security is downgraded to below the rating mandated in the index methodology (including downgrade to below investment grade), the portfolio can be rebalanced within 30 calendar days.

What is the minimum investment amount during NFO?

During the NFO, the minimum investment is ₹1,000, and in multiples of ₹100 thereafter. 

How can I buy or sell units after the NFO?

All categories of Investors may purchase the units through the secondary market on any trading day in a minimum lot of 1 unit and in multiples thereof on the exchange(s) where the units are listed.

Large investors can purchase units directly from the fund in "Creation Unit Sizes" of 1,50,000 units or multiples thereof, provided the transaction value exceeds ₹ 25 crores.

Is a demat account mandatory to invest in this ETF?

Yes, a demat account is mandatory. The units are available only in electronic (dematerialised) form.

Are there any lock-in periods or restrictions on selling my units?

No, there is no lock-in period for Zerodha Nifty 8-13 Yr G-Sec ETF. You can sell your units on the stock exchange on any business day.

Are there any entry or exit loads?

No. There is no entry load, and the exit load is NIL.

Are there any other charges I should be aware of?

Yes, the following charges shall apply i.e., Total Expense Ratio (TER) which is  capped at 1.00%, Per year NFO expenses which are paid by the AMC, and a 0.005% stamp duty on purchases.

What is the dividend policy for this ETF?

The scheme does not offer a dividend (IDCW) option and offers only a "Growth" plan.

How risky is it to invest in this scheme?

The scheme is classified as "Moderate Risk" on the SEBI Risk-o-meter.

How can I invest in this fund?

This Fund is available for investing during NFO on Coin, MFU and MFC.After subscription reopens,  it will be available on our WhatsApp channel, Coin by Zerodha, Groww, Kuvera, Paytm Money, IND Money, CAMS Online, MFU and MFC and other such platforms

What is "tracking error" or "tracking difference"?

This is the difference between the fund's return and the index's return. It occurs due to factors like expenses of the fund, cash holdings, and transaction costs etc. The fund aims to keep the annualized tracking difference within 1.25%.

What are the liquidity risks associated with this ETF?

There is a risk that the total trading volume for the ETF on a particular day on the stock exchange could be low, making it difficult to sell units quickly at a fair price. The underlying government securities are generally liquid, but large trades can still incur significant impact costs.

What are the risks specific to trading ETFs on a stock exchange?

The ETF's market price can trade at a premium or discount to its Net Asset Value (NAV) due to supply and demand. Also, an investor's ability to trade can be suspended by market-wide "circuit breakers".

How does the AMC plan to mitigate these risks?

The AMC has a risk management framework to address and mitigate various risks. Credit risk is extremely low as the portfolio consists of sovereign Government Securities. While interest-rate risk is inherent to the strategy, the portfolio's duration is monitored to keep it aligned with the index. Tracking error is minimized by actively aligning the portfolio with the index composition. Finally, liquidity risk is managed by investing in highly liquid instruments like Government Securities and TREPS and holding a portion of assets in cash for redemptions.