Reliance Junior BeES FoF: Should You Invest?
Feb 25, 2019

Author: Aditi Murkute

(Image source: Image by geralt)

Reliance Nippon Mutual Fund has launched a passively managed fund Reliance Junior BeES Fund of Fund (RJBFoF). It is an open-ended equity scheme that will invest in an open-ended ETF - Reliance ETF Junior BeES and will try to mirror its performance by investing in stocks constituting in Nifty Next 50 Index.

As you may be aware, a passively managed fund mirrors the performance of its underlying benchmark index and does not require active management. The manager of such a fund buys only the stocks of the underlying index and exits a certain stock only when the respective stock exits from the index to be replaced by another one.

About Reliance Junior BeES Fund of Fund

As stated earlier, RJBFoF is a type of fund of fund that will invest 95% of its total assets in the units of another fund( Reliance ETF Junior BeES) from the fund house within the prescribed limits.

Reliance ETF Junior BeES ETF invests predominantly in well diversified Nifty Next 50 index constituents spread across industries.

Nifty Next 50 index represents companies that are presented below the NIFTY 50 index of large-cap companies that have the potential to get included in the NIFTY 50 in future. NIFTY Next 50 has a well-diversified portfolio across sectors with relatively less concentrated exposure to any one sector. And they are in order of free float market capitalization, subject to index criteria.

Hence, it is imperative to understand the risks involved. However, given that the underlying scheme Reliance ETF Junior BeES ETF is a purely equity-based index, only investors who have the stomach for high risk and an investment time horizon of at least 5 years, should consider investing in it.

[Read: Why Comparing Returns to Risk Is More Meaningful!]

Table 1: NFO Details

Type An open-ended fund of funds scheme investing in Reliance ETF Junior BeES Category Domestic FOF
Investment Objective To seek to provide returns that closely correspond to returns provided by Reliance ETF Junior BeES by investing in units of Reliance ETF Junior BeES.

However, there can be no assurance or guarantee that the investment objective of the Scheme will be achieved.
Min. Investment Rs 5,000 and in multiples of Re 1 thereafter Face Value Rs 10 per unit
Plans • Regular

• Direct
Options • Growth
• Dividend (Pay-out Option and Re-investment Option)
Entry Load Nil Exit Load Nil
Fund Manager Mr Mehul Daman Benchmark Index Nifty Next 50 Index
Issue Opens February 18, 2019 Issue Closes February 28, 2019
(Source: Scheme Information Document)

How will the scheme allocate its assets?

Under normal circumstances, it is anticipated that the asset allocation of RJBFoF will be as follows:

Table 2: RJBFoF's Asset Allocation

Instruments Indicative Allocation (% of Total Assets) Risk Profile
Minimum Maximum
Units of Reliance ETF Junior BeES 95 100 Medium to High
Reverse repo and /or Tri-Party Repo and/or short-term fixed deposits and/or Schemes which invest predominantly in the money market securities or Liquid Schemes*. 0 5 Low to Medium
*The Fund Manager may invest in Liquid Schemes of Reliance Mutual Fund. However, the Fund Manager may invest in any other scheme of a mutual fund registered with SEBI, which invest predominantly in the money market securities.
The Scheme will not invest in derivatives, securitized debt, ADR, GDR, foreign Securities, nor will it engage in short selling and Repo in corporate debt.
Subject to the SEBI Regulations as applicable from time to time, the Scheme may, if the Trustees permit, participate in securities lending. The maximum exposure of the Scheme to a single intermediary in the stock lending programme at any point of time would be limited to 5% of the market value of its equity portfolio or up to such limits as may be specified by SEBI. The Scheme will not lend more than 20% of its corpus.
The cumulative gross exposure across all asset classes should not exceed 100% of the net assets of the scheme.
(Source: Scheme Information Document)

What will be the Investment Strategy?

To achieve the investment objective, the scheme will predominantly invest in units of Reliance ETF Junior BeES which is registered with SEBI. Further, Reliance Junior BeES FoF can buy/sell the units from the underlying scheme in Creation Unit Size also by way of cash. The investments could be made in units of Reliance ETF Junior BeES either directly through Reliance Nippon Life Asset Management Ltd (RNAM) in creation unit size or through the secondary market via stock exchange route.

The facility to buy directly through RNAM in creation unit size would provide Reliance Junior BeES FoF an additional source to purchase the units in addition to the stock exchange route. The investment strategy would largely be passive in nature.

The AMC shall endeavour that the returns of Reliance Junior BeES FoF will replicate the returns generated by the underlying ETF and is not expected to deviate more than 2%, on an annualized basis net of recurring expenses in the Scheme.

Considering the investment in the scheme is made in units of Reliance ETF Junior BeES (which is benchmarked to Nifty Next 50 Index) with the objective of achieving return commensurate with the performance of Reliance ETF Junior BeES, this fund will have Nifty Next 50 Index as the benchmark.

Who will manage RJBFoF?

Reliance Junior BeEs Fund of Fund will be managed by Mr Mehul Daman. Mr Daman has done his C.A. and is a Commerce graduate (B. Com) with a work experience of over 14 years.

Prior to joining Reliance Nippon Life Asset Management Limited in November 2016 as a Finance ETF Lead to get promoted to a Dealer and currently a Fund Manager, he was a Vice President - Controllers at Goldman Sachs Asset Management (India) Private Limited. Before that he was an Assistant Vice President - Operations / Controllers at Benchmark Asset Management Company Private Limited and an Assistant Manager at Lovelock & Lewes.

Some of the schemes which Mr Mehul Daman manages at the fund house include Reliance ETF Consumption, Reliance ETF Dividend Opportunities, Reliance ETF Gold BeES, Reliance ETF Infra BeES, Reliance ETF Nifty 100, Reliance ETF NV20, Reliance ETF PSU Bank BeES, Reliance ETF Sensex, Reliance ETF Shariah BeES, Reliance Index Fund - Nifty Plan, Reliance Index Fund - Sensex Plan, Reliance Gold Savings Fund, Reliance ETF Nifty Midcap 150.

What is the outlook for Reliance Junior BeEs FoF?

The aim of Reliance Junior BeEs Fund of Fund is to capture potential returns of the underlying Reliance Junior BeEs ETF for over a longer horizon. Since it is a passively managed fund, the fortune of the fund relies on the performance of the underlying ETF and the tracking benchmark.

The fund house states in its presentation the reasons behind investing in Reliance Junior BeEs ETF.

  • It is well diversified across sectors and comprises of stocks that are part of Nifty Next 50 Index

  • Nifty next 50 index acts an incubator that constituents the potential future large cap.

  • Provides an opportunity to invest directly in an ETF through SIP route.

  • Reduces non-systemic risk of stock selection because of passive management.

  • The expense involved is less.

Table 3: Performance of Reliance Junior BeEs ETF against Nifty Next 50

Scheme Name Absolute returns (%) CAGR (%)
1 Year 2 Years 3 Years 5 Years
Category: ETFs - Other
Reliance ETF Junior BeES -8.90 4.34 15.16 17.28
Category: Benchmark
NIFTY NEXT 50 - TRI -8.77 4.82 16.00 18.28
(Source: ACE MF; Performance as on 22nd February 2019)

However, note that the Reliance Junior BeEs ETF has been mirroring the benchmark and not been able to outperform the Nifty Next 50 index over a period of 1, 2, 3 and 5 years. So, it has not managed to gain much of investors confidence in terms of investment.

Besides currently Indian equity market is likely to hit turbulence and the journey of wealth creation in the near-term would not be smooth. As there are other domestic macroeconomic factors in play as well: GDP growth losing momentum; farmer distress; unemployment; possibility of inflation ticking up again; vulnerable rupee; tax evasion plus revision in GST rates hurting tax collections; possible fiscal slippages, and the upcoming Lok Sabha elections would obviously be making the markets volatile.

Therefore, whether to sign up for this fund or avoid will depend on your preference, suitability and risk appetite as an investor. Reliance Junior BeEs, however, offers an opportunity to investors who would prefer enjoying the benefit of the fund through the SIP mode instead of buying units of the Reliance Junior BeEs ETF directly from the exchange. But you need to keep in mind your preferences before signing up for the fund.

[Read:  Skip NFOs, Instead Consider Building A Strategic Mutual Fund Portfolio]

PS: If you are looking to invest in the best equity mutual funds that you could invest in 2019 right away, here is PersonalFN's special premium report: Top 5 Equity Funds to Invest In 2019. A report that tells you about five worthy, high growth potential equity schemes that can be instrumental in building significant wealth over the next 5-7 years.


About the Company including business activity

Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989.

QIS was promoted by Mr Ajit Dayal with an objective of providing value-based information/views on news related to equity markets, the economy in general, sector analysis, budget review and various personal products and investments options available to the Public. It was the first company to start equity research on an institutional level.

'PersonalFN' is a service brand of QIS and was started in the year 1999. In 1999, the Company registered the Domain name for providing information on mutual funds and personal financial planning, financial markets in general, etc. and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services.

Quantum Information Services Private Limited (QIS) is registered as Investment Adviser under SEBI (Investment Adviser) Regulations, 2013 and having Registration No.: INA000000680. In terms of the second proviso to Regulation 3 (1) of SEBI (Research Analysts) Regulations, 2014 the Company is not required to obtain Certificate of registration from SEBI.

Disciplinary history

There are no outstanding litigations against the Company, its subsidiaries and its Directors.

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Details of associates

  1. Money Simplified Services Private Limited;

  2. PersonalFN Insurance Services India Private Limited;

  3. Equitymaster Agora Research Private Limited;

  4. Common Sense Living Private Limited;

  5. Quantum Advisors Private Limited;

  6. Quantum Asset Management Company Private Limited;

  7. India Private Limited;

  8. HelpYourNGO Foundation;

  9. Natural Streets for Performing Arts Foundation;

  10. Primary Real Estate Advisors Private Limited;

  11. HYNGO India Private Limited;

  12. Rahul Goel;

  13. I V Subramaniam.

Disclosure with regard to ownership and material conflicts of interest
  1. ‘subject company’ is a company on which a buy/sell/hold view or target price is given/changed in this Research Report;

  2. Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company;

  3. Neither QIS, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one per cent or more securities of the subject Company, at the end of the month immediately preceding the date of publication of the research report;

  4. Neither QIS, it's Associates, Research Analyst or his/her relative has any other material conflict of interest at the time of publication of the research report except that QIS (PersonalFN) is, as per SEBI (Mutual Funds) Regulations 1996, an associate / group Company of Quantum Asset Management Company Private Limited and Trustees and Sponsor of Quantum Mutual Fund (QMF) and to that extent there may be conflict of interest while recommending any schemes of QMF. However, any such recommendation or reference made is based on the standard evaluation and selection process, which applies uniformly for all Mutual Fund Schemes. The payment of commission (upfront / annualized & trail), if any, for any Schemes by QMF to QIS (PersonalFN) is also at arm's length and as per prevailing market practices.

Disclosure with regard to receipt of Compensation
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General disclosure
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  2. QIS or the Research Analyst has not been engaged in market making activity for the subject Company.

Definitions of Terms Used
  1. Buy recommendation:This means that the subscriber could consider buying the concerned fund keeping in mind the tenure and objective of the recommendation service.

  2. Hold recommendation:This means that the subscriber could consider holding on to the fund until further update. However, additional purchase via ongoing SIP can be considered.

  3. Sell recommendation: This means that the subscriber could consider selling the fund keeping in mind the objective of the recommendation service.

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Quantum Information Services Private Limited CIN: U65990MH1989PTC054667 Regd. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021 Corp. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021. Email: Website: Tel.: 022 61361200 Fax.: 022 61361222

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