Get Out of India-listed International ETFs while you still can
International ETFs listed in India may look like a simple way to invest overseas. But many are now trading significantly away from the value of the assets they represent.
The risk is straightforward: you may sell an ETF at a large discount or buy one at a premium without realising it.
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What is the difference between Price and iNAV?
Price, is the price that you pay for an ETF. It's based on demand and supply factors.
iNAV, or Indicative Net Asset Value, is an estimated real time value of those underlying assets during market hours. This is the true value of an ETF.
The current gap in international ETFs
The following snapshot illustrates the problem.
Values are as on 10 September:
ETF | Price (₹) | iNAV (₹) | Price vs NAV |
Motilal Oswal Nasdaq Q50 | 203.55 | 116.66 | 74.48% |
Motilal Oswal Nasdaq 100 | 333.50 | 274.10 | 21.67% |
Mirae Asset S&P 500 Top 50 | 96.20 | 67.01 | 43.56% |
Mirae Asset NYSE FANG+ | 227.85 | 173.53 | 31.30% |
Mirae Asset Hang Seng Tech | 22.34 | 17.70 | 26.21% |
Nippon India ETF Hang Seng BeES | 466.25 | 452.31 | 3.08% |
For every one of these ETFs, you're paying significantly more than the underlying value.
What do you think happens if there is a crash? The value of these ETFs will fall at a seriously fast pace and there may be no exit.
Why does this happen?
Demand > Supply. Simple maths. When demand for foreign investing is so high, everyone wants to invest in the easiest possible solution.
FoFs are affected too
The problem does not disappear if you own a Fund of Fund.
For example, the Motilal Oswal Nasdaq 100 Fund of Fund invests in the Motilal Oswal Nasdaq 100 ETF.
So get out of funds that invest in any of these underlying ETFs.
A better route for HNI investors
For meaningful international allocations, Indian-listed international ETFs may not be the most efficient structure.
HNI investors should consider comparing them with:
US-domiciled ETFs
Irish-domiciled UCITS ETFs
GIFT City Outbound funds
Each route has different implications for taxation, estate tax, currency movement, reporting, remittance, liquidity and inheritance planning.
We did a detailed comparison on this recently: US ETFs vs UCITS Irish ETFs vs GIFT City
Need help planning your global investments?
For serious investors, a mistake like investing in any of the above ETFs can destroy your portfolio.
If you need help planning your finances and taxes, contact us today. Let’s review your portfolio and financial plans to ensure you don’t leave money on the table.
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