How Nippon’s planned EV fund stacks up against Mirae Asset, Navi MF’s EV schemes

Nippon India Mutual Fund is seeking regulatory approval to launch a new scheme that will give investors exposure to the fast-growing electric vehicle industry, becoming the third fund house in India to do so.

The Nippon India S&P EV Index Fund will be an open-ended and passively managed scheme, according to the fund house’s application to the Securities and Exchange Board of India.

Passively managed funds track an underlying index, so no fund manager makes active investment decisions. As a result, these charge much lower fund management fee than actively managed schemes.

The Nippon fund is the third MF scheme in India that plans to invest in the EV industry, as environmental concerns and tightening regulations worldwide boost demand for less-polluting vehicles. While India is far behind in the race to adopt EVs, many Indians are betting on EVs as an investment theme looking at the success of US-based Tesla Inc.

In recent months, two other mutual fund houses in India have sought SEBI approval to launch EV-focused schemes. In early October, Mirae Asset MF applied for the Mirae Asset Electric and Autonomous Vehicles ETFs Fund of Fund. And last month, Flipkart co-founder Sachin Bansal’s Navi Mutual Fund had filed an application for Navi Electric Vehicles and Driving Technology Fund of Fund with SEBI.

So, how do these three planned schemes compare?

Nippon India S&P EV Index Fund

This fund will replicate or track the S&P Kensho Electric Vehicles Index, which invests in companies involved in the EV sector and the ecosystem supporting EVs.

The S&P Kensho Electric Vehicles Index was launched on September 17, 2018 and has delivered an annualised return of about 40% over the past three years.

The fund invests in companies that produce electric vehicles, powertrains, energy storage systems, clean fuel technology (such as hydrogen fuel cells) and charging infrastructure.

The fund has invested in 44 companies. Its top five constituents are Aspen Aerogels Inc (6.37%), Li Auto Inc (3.75%), XPeng Inc (3.45%), Fisker Inc (3.22%) and Tesla Inc (3%).

The US accounts for 30 of the 44 companies, followed by China with five companies. Three Canadian, two Japanese and one Indian company—Tata Motors Ltd—form part of the index.

Mirae Asset Electric & Autonomous Vehicles ETFs FoF

The Mirae Asset fund plans to invest in overseas equity exchange-traded funds that, in turn, invest in companies involved in the development of electric and autonomous vehicles and related technology, components and materials. The scheme will be benchmarked to Solactive Autonomous & Electric Vehicles Index.

The Solactive index comprises 76 companies. Almost 61% of the companies are American while 8.5% are Japanese. The top companies in the index by weightage are Tesla (3.66%), Alphabet Inc (3.28%), Nvidia (3.15%), Microsoft (3.15%) and Toyota Motor (2.91%). Other companies in the index include Apple, Intel, Qualcomm, General Motors, Ford, and General Electric.

The index has generated year-to-date returns of 16.7% as of October 11, 2021, on top of the 54.55% returns last year. Its annualised return since inception is around 19.5%.

Navi Electric Vehicles and Driving Technology FoF

This FoF will track the performance of STOXX Global Electric Vehicles & Driving Technology NET Index, which comprises EVE companies and those involved in assisted driving technologies. STOXX is part of Deutsche Boerse Group.

The planned FoF will invest in a combination of exchange-traded funds and index funds or either of these. The scheme aims to provide long-term capital appreciation by investing in units of overseas ETFs and/or index funds that invest in electric vehicles and driving technology, its application showed.

The Stoxx index comprises 90 companies. These include Tesla, Garmin, Samsung, Toyota, Intel, Maruti Suzuki, Nissan, Honda Motor, Daimler, BMW, Ford Motor, General Motors and Volvo.

This index is more geographically diversified than the S&P and Solactive indexes. This is because US companies account for only 42.3% of its basket while Japanese companies account for 13.5%, Korean companies 11.1% and Indian companies 7.3%.

The index has gained nearly 17.4% year to date, on top of the 33.2% gain clocked in 2020.