Navi, ABSL file for metaverse, blockchain ETF fund of funds

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Navi Mutual Fund and Aditya Birla Sun Life (ABSL) Mutual Fund have filed scheme information documents with market regulator Sebi for feeder funds. These schemes will focus on metaverse and blockchain technology themes, respectively. 

Navi’s Metaverse ETF Fund of Fund (FoF) will invest in overseas ETFs, which provide exposure to companies that benefit from the advances in the field of metaverse.

ABSL’s blockchain & virtual digital assets  (VDAs) ETFs FoF will be investing in the units of global ETFs focused on the global blockchain theme (including VDAs).

Metaverse theme: The general understanding of the metaverse is that it is a shared virtual environment that allows people to connect virtually via the internet. Global ETFs have already invested in companies with a focus on metaverse technology.   Navi Mutual Fund will be investing in a few such ETFs. The indicative list is Roundhill Ball Metaverse ETF and Proshares Metaverse ETF. Both the ETFs were launched recently. 

The benchmark of Navi’s FoF will be Solactive Metaverse Theme Index. This index comprises of companies including Apple Inc, Meta Platforms, Alphabet, Microsoft Corp, Nvidia Corp, Amazon, Himax Technologies, Snap Inc, Vuzix Corporation and Wimi Hologram Cloud Inc. About half of these top holdings form part of NASDAQ 100 Index as well. 

Digital assets: ABSL’s new fund, as per its scheme information document, can invest in overseas ETFs including Amplify Transformational Data Sharing ETF, Siren Nasdaq NexGen Economy ETF, Bitwise Crypto Industry Innovators ETF, Valkyrie Bitcoin Strategy ETF and ProShares Bitcoin Strategy ETFs.

The ABSL’s FoF will be benchmarked against the MSCI ACWI IMI Blockchain Economy Index. This benchmark tracks large, mid and small-cap securities across 23 developed markets and 25 emerging market countries. The benchmark index represents the performance of companies in the digital assets market space and decentralised finance.  While the underlying ETFs follows a passive investment strategy, the performance of ABSL’s FoF will depend on the selection of underlying ETFs and related themes by its fund manager. 

It is unclear yet if Sebi will give its nod to this particular ABSL scheme. In December last year, Sebi stated that domestic mutual funds cannot make investments in crypto-related products until regulations are in place for digital assets. 

Experts’ view: Experts believe that the new themes may not fit into the core portfolio of investors. Prableen Bajpai, founder, FinFix Research and Analytics, said, “Even when investing outside India, one should maintain a core and satellite portfolio structure. But investments in blockchain or the VDAs themes cannot become one’s core portfolio.” 

Even if one is investing in standardized indices outside India like S&P 500 and NASDAQ, one can get exposure to the majority of the companies covered in these indices, she added.

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