Unveiling the Potential: A Deep Dive into Navi US Total Stock Market FOF

Table of Contents

Analyzing Navi US Total Stock Market FoF Direct Growth

Fund Name: Navi US Total Stock Market FoF Direct Growth
Fund Type: The Navi US Total Stock Market FoF Direct Growth is categorized under “Other FoF Overseas/Domestic,” designed for investors seeking exposure to the US stock market. This fund offers a very high-risk investment option, making it suitable for individuals with a high-risk tolerance and a long-term investment horizon.
Fund Manager Background: Managed by Aditya Mulki, who has 6 years of experience, this fund is part of Navi Mutual Fund’s diverse portfolio. Mulki’s expertise in managing overseas funds is evident in the fund’s performance and strategic investment in the Vanguard Total Stock Market ETF (VTI) or the Schwab Total Stock Market Index Fund (SWTSX).

Holding Analysis or Portfolio Breakdown

The fund’s portfolio is highly concentrated, with 100.06% investment in VANGUARD ETF, indicating a single-asset focus. This is complemented by a -0.06% holding in cash & cash equivalents, balancing liquidity with investment.

Returns and Rankings in Their Category

Since its inception on 24 Feb 2022, the fund has delivered impressive average annual returns of 33.05%. With an expense ratio of just 0.06%, it ranks well within its category, outperforming many peers in terms of returns. This low expense ratio, combined with a 0% exit load, enhances the attractiveness of the fund for long-term investors.

Fund Age: The Navi US Total Stock Market FoF Direct Growth has been operational for a little over two years, making it a relatively new entrant in the mutual fund landscape. Despite its short history, its performance has been noteworthy.

Pros and Cons Analysis

Pros

Low Expense Ratio: At 0.06%, it is among the lowest in its category, ensuring more of your investment goes towards growth rather than fees.
Impressive Returns: With average annual returns of 33.05% since inception, the fund has outperformed many of its peers.
No Exit Load: Investors can redeem their holdings without any charges, offering flexibility and ease of liquidity.
Simplified Investment: The fund’s investment in major ETFs like the Vanguard Total Stock Market ETF provides diversified exposure to the U.S. stock market.

Cons

High Risk: Classified as very high risk, it might not be suitable for all investors, especially those with a low risk tolerance.
Limited Track Record: Being a relatively new fund, it has a shorter performance history to assess long-term viability.

Conclusion: The Navi US Total Stock Market FoF Direct Growth stands out for its low expense ratio and impressive returns. Its focus on ETFs provides investors with a simplified yet effective way to gain exposure to the U.S. stock market. While its high-risk level and limited track record may deter some, for investors with a suitable risk profile and a long-term investment horizon, this fund presents a compelling option.

TLDR: Navi US Total Stock Market FoF Direct Growth Analysis

For High-Risk Investors:

Ideal for Long Term (>5 years): With an average annual return of 33.05% since inception, and a very high-risk profile, this fund is suitable for high-risk investors looking for long-term capital appreciation.
Not Recommended for Short or Medium Term: Given its high-risk nature, it might not be ideal for those with short (<=1 year) or medium-term (1-5 years) investment horizons.

For Medium & Low-Risk Investors:

Not Suitable: Due to its very high-risk classification, it’s not recommended for medium or low-risk investors regardless of the investment horizon.

Key Data Points:

Current NAV: ₹13.58 as of 27 Mar 2024.
Turnover Ratio: Not provided, but the lack of this data suggests a review of the fund’s strategy and operations is needed for potential long-term investors.
Returns: Not available for 1, 3, and 5 years due to its inception date (24 Feb 2022), but the fund has an impressive inception-to-date return of 33.05% annually.
Expense Ratio: Exceptionally low at 0.06%, which is favorable for long-term growth as it minimizes operational costs deducted from returns.
Advanced Ratios: The fund exhibits a Sharpe Ratio of 2.35, indicating a strong risk-adjusted return compared to its peers. This is complemented by a Sortino Ratio of 4.27, suggesting it manages downside risk well, and an Alpha of 29.08, highlighting its ability to outperform the benchmark significantly.

Peer Comparison:

Compared to peers like the Motilal Oswal Nasdaq 100 FOF and Franklin India Feeder – Franklin U.S. Opportunities Fund, Navi’s fund offers significantly lower expense ratios but lacks data on long-term performance due to its recent inception.

Analysis:

Leading in Low Expense Ratio: Significantly lower than peers, maximizing investor returns.
Unknown Turnover Ratio: Investors need clarity on this for a complete understanding of the fund’s trading behavior.
High Returns Since Inception: Although it shows promising early performance, its very high risk and short operational history might not suit every investor.
Advanced Ratios Show Strength: Excellent risk-adjusted performance metrics, indicating strong management capability.
Lacks Long-term Performance Data: Being a relatively new fund, it lacks a longer performance track record, which is crucial for assessing its resilience and consistency over time.

Conclusion:

The Navi US Total Stock Market FoF Direct Growth is best suited for high-risk investors with a long-term investment horizon, offering low operational costs and promising early returns. However, the absence of a longer track record and unspecified turnover ratio are considerations that potential investors should weigh carefully.

Analysis of Navi US Total Stock Market FoF Direct Growth

Current NAV

NAV as of 27 Mar 2024: ₹13.58. The Net Asset Value (NAV) reflects the fund’s per share market value, crucial for assessing entry and exit points.

Turnover Ratio

Turnover Ratio: Not provided. This ratio indicates the frequency at which the fund’s holdings are replaced within a year. A low turnover ratio suggests a long-term investment strategy, while a high ratio may imply a more active trading approach, potentially leading to higher transaction costs and taxes.

Returns in the Last 1, 3, 5 Years

Returns Data: Since the fund was launched on 24 Feb 2022, there is no available data for returns over 1, 3, or 5 years. However, the fund has delivered an average annual return of 33.05% since its inception, indicating strong initial performance.

Key Metrics

Expense Ratio

0.06% as of 28 Mar 2024: This is exceptionally low, which is beneficial as lower expense ratios can significantly enhance long-term investment returns.

PE Ratio

The PE ratio for this fund is not directly provided but is an essential metric indicating the price paid for a share relative to its earnings. For funds, it can reflect the aggregate PE of the underlying holdings.

Sharpe Ratio

2.35: This measures the performance of an investment compared to a risk-free asset, after adjusting for its risk. A higher Sharpe ratio indicates better risk-adjusted returns, suggesting that the fund has efficiently managed to provide higher returns per unit of risk.

Category Expense Ratio (Cat Exp Ratio)

Average of 1.14% for the category: The Navi Fund’s expense ratio is significantly lower than the category average, indicating cost-effective management.

Category Sharpe Ratio (Cat Sharpe Ratio)

Average of 1.41 for the category: The fund’s Sharpe Ratio is superior to the category average, highlighting its better risk-adjusted performance compared to peers.

Pros and Cons

Pros

Low Expense Ratio: At 0.06%, the fund’s management fees are minimal, which is favorable for investors.
High Initial Returns: The fund has shown strong performance since inception with a 33.05% average annual return.
Strong Risk-Adjusted Performance: A Sharpe ratio of 2.35 indicates that the fund has provided excellent returns for the level of risk taken.

Cons

Lack of Historical Data: With an inception date in 2022, there’s limited historical performance data to evaluate long-term potential.
Turnover Ratio Unspecified: Without this data, it’s challenging to assess the fund’s trading strategy and its impact on costs and tax efficiency.
Risk Level: Classified as very high risk, which may not be suitable for all investors.

Conclusion

The Navi US Total Stock Market FoF Direct Growth presents a promising opportunity for investors seeking exposure to the US market with a very high-risk tolerance. Its standout features include a remarkably low expense ratio and strong initial returns. However, potential investors should consider the lack of long-term performance data and unspecified turnover ratio. The fund’s high Sharpe ratio suggests it has been effective at managing risk relative to its returns, making it an intriguing option for those willing to embrace its risk profile for potentially higher rewards.

Top Holdings Company

VANGUARD ETF

Weight (%): 100.06
This fund is a Fund of Funds (FoF) that primarily invests in the Vanguard ETF, providing diversified exposure to the US stock market. The singular focus on a Vanguard ETF indicates a strategy aimed at tracking the broader market performance in the United States.

Advanced Ratios

Standard Deviation: 12.55, indicating the fund’s return volatility over the past year. This metric helps assess the risk level, with a higher number suggesting greater volatility.
Beta: 0.10, showcasing the fund’s sensitivity to movements in the market. A beta close to 1 implies the fund’s price would move in line with the market, while this low beta suggests minimal sensitivity.
Sharpe Ratio: 2.35, reflecting the fund’s ability to deliver risk-adjusted returns. Higher values denote better returns on each unit of risk.
Sortino Ratio: 4.27, a variant of the Sharpe ratio that differentiates harmful volatility from total overall volatility by using the standard deviation of negative asset returns only. This higher value indicates strong risk-adjusted returns, focusing on downside risk.
Alpha: 29.08, measures the fund’s performance relative to a benchmark index. A positive alpha of 29.08 suggests the fund has outperformed its benchmark index significantly.

Peer Comparison

Comparing Navi US Total Stock Market FoF Direct Growth with its peers, it showcases an exceptional performance and cost-efficiency:

Expense Ratio: At 0.06%, it’s significantly lower than peers, enhancing net returns for investors.
Returns: With a one-year return of 33.31%, it outperforms many of its peers in the short term. However, due to its recent inception, longer-term data is unavailable.

Fund House and Investment Objective

Fund House: Navi Mutual Fund, known for innovative and cost-effective investment solutions.
Investment Objective: The scheme aims to provide long-term capital appreciation by investing in units of the Vanguard Total Stock Market ETF (VTI) or the Schwab Total Stock Market Index Fund (SWTSX), although it primarily invests in VANGUARD ETF as per the portfolio data. There is no guarantee that the investment objective will be achieved, reflecting a common disclaimer for mutual funds.

Pros

Extremely low expense ratio, enhancing investor returns.
Strong performance since inception with high alpha, suggesting effective management and strategy.
High Sharpe and Sortino ratios indicate excellent risk-adjusted returns, especially considering downside risks.

Cons

Limited historical data due to recent inception, making long-term performance evaluation challenging.
Very high risk, as indicated, may not suit all investors, especially those with low risk tolerance.
Single holding concentration, while providing direct exposure to the US market, lacks diversification within the fund.

In conclusion, the Navi US Total Stock Market FoF Direct Growth appears to be a compelling option for investors seeking US market exposure with high risk tolerance, prioritizing cost-efficiency and short-term performance. However, its suitability largely depends on the investor’s risk appetite and investment horizon, given the inherent risks and the fund’s focus on a single ETF.

Is It Following Any Indices or Benchmark?

Yes, the Navi US Total Stock Market FoF Direct Growth aims to provide long-term capital appreciation by investing in units of the Vanguard Total Stock Market ETF (VTI) or the Schwab Total Stock Market Index Fund (SWTSX). These funds are designed to track the performance of the CRSP US Total Market Index, a comprehensive representation of the U.S. stock market.

Risk Profile of This Mutual Fund

The Navi US Total Stock Market FoF Direct Growth is categorized as having a Very High Risk profile. This classification indicates that the fund may experience significant fluctuations in value over short periods, making it suitable for investors with a high risk tolerance and a long-term investment horizon.

Market Cap Weightage

Given the fund’s investment in a Vanguard ETF that tracks the CRSP US Total Market Index, the market cap weightage mirrors that of the index, predominantly investing in large-cap companies, with mid-cap and small-cap exposure as well. The exact distribution is not specified, but the CRSP US Total Market Index is known for its comprehensive coverage across different market caps, with a tilt towards large-cap companies due to market-cap weighting.

For Whom This Mutual Fund Is Suitable – The Investor Profile

Suitable for Investors Who:

Have a very high risk tolerance: Given its risk profile, it’s best suited for investors who can withstand significant volatility in exchange for potentially higher returns.
Seek long-term capital growth: This fund is ideal for those looking to invest in the U.S. stock market for long-term appreciation, leveraging the growth potential of U.S. equities.
Prefer low-cost options: With an exceptionally low expense ratio of 0.06%, it appeals to cost-conscious investors who want to maximize returns by minimizing fees.
Desire exposure to U.S. markets: It’s suitable for investors looking to diversify internationally, particularly into the U.S. stock market, through a single investment vehicle.

Not Suitable for Investors Who:

Are risk-averse: Given its very high-risk level, it’s not suitable for those with a low tolerance for volatility or those nearing retirement age without a sufficient risk buffer.
Require immediate liquidity or short-term investment: The nature of the fund’s investments makes it less ideal for those seeking short-term gains or needing immediate access to their investment.
Prefer direct stock investments: Investors who prefer selecting individual stocks or want direct control over their investment choices may find the indirect nature of this fund (being a FoF) less appealing.

In conclusion, the Navi US Total Stock Market FoF Direct Growth is a compelling option for investors aiming for long-term growth by tapping into the vast potential of the U.S. stock market, provided they are comfortable with its very high-risk profile and the inherent volatility of equity investments.

Risk Profile Analysis

The Navi US Total Stock Market FoF Direct Growth is classified as having a Very High Risk profile. This categorization implies a significant level of volatility and potential for large fluctuations in fund value, which can result from its investment strategy focused on the U.S. stock market. This fund is suitable for investors with a high risk tolerance and a long-term investment horizon who seek exposure to the U.S. equity market and are comfortable with the associated risks of market fluctuations.

Scheme Information

Scheme Type: Other FoF Overseas/Domestic
Risk Level: Very High Risk
NAV: ₹13.58 as of 27 Mar 2024
Inception Date: 24-Feb-22
Expense Ratio: 0.06% as of 28 Mar 2024
AUM: ₹861.43Cr as of 28 Mar 2024
Investment Objective: To provide long-term capital appreciation by investing in units of Vanguard Total Stock Market ETF (VTI) or Schwab Total Stock Market Index Fund (SWTSX), aiming to track the performance of the CRSP US Total Market Index.

AMC Profile and AUM in Details

AMC: Navi AMC Limited

Contact Details:
- Phone: 033 40185000
- Email: mf@navi.com
- Website: https://www.navimutualfund.com
Fund Manager: Aditya Mulki, with 6 years of experience managing 28 funds.

Assets Under Management (AUM):

AUM Size: ₹861.43 Crore as of 28 Mar 2024. This indicates a substantial pool of assets, showcasing investor confidence and the scale at which the fund operates. The AUM size is considerable, allowing for diversified investments and potentially reducing risk through spreading investments across various assets within the target index.

Pros:

Low Expense Ratio (0.06%): Significantly lower than many peers, maximizing investor returns by minimizing operational costs.
No Exit Load: Offers flexibility for investors to enter and exit without incurring additional fees.
Diversification: Provides exposure to a broad range of U.S. stocks across various sectors and market caps, enhancing diversification.
Transparent and Simple Investment Objective: Targets well-known U.S. total stock market indices through established ETFs, providing clarity on investment strategy.

Cons:

Very High Risk: Not suitable for all investors, especially those with low risk tolerance or short-term investment horizons.
Lack of Historical Data: Being a relatively new fund (inception in 2022), there is limited historical performance data to assess long-term viability.
Market-Specific Risks: Exposure to U.S. market dynamics, including currency risk and geopolitical factors, could impact returns.

In conclusion, the Navi US Total Stock Market FoF Direct Growth presents an attractive opportunity for investors looking for growth through exposure to the U.S. stock market, provided they are comfortable with the associated very high risk and have a long-term perspective. The fund’s low expense ratio and significant AUM further bolster its appeal, though potential investors should weigh these factors against their personal risk tolerance and investment goals.