In conversation with Chintan Haria, Head-Product Development and Strategy, ICICI Prudential AMC

We are witnessing increased traction across financial instruments, be it stocks, mutual funds, or ETFs; asserts Chintan Haria, Head-Product Development and Strategy, ICICI Prudential AMC

Can you highlight the factors that are expected to drive massive retail participation in ETFs over the next 3-5 years?   

Improved awareness about passive offerings & passive investing has led to a surge in investors exploring ETFs and index funds over the past couple of years. Going forward, we believe innovative offerings in the form of smart beta funds, ETFs, or FoFs, which enable investors to gain access to international markets or geographies, will all aid in garnering investor interest. Also, the positive investment experience of early adaptors will further aid in increasing the acceptance of ETFs among investors at large. 

ETFs are suitable for which type of investors? 

ETFs are suited for all kinds of investors. With savings in India on a steady rise, investors today are exploring investment avenues outside traditional investment options. Hence, we are witnessing increased traction across financial instruments, be it stocks, mutual funds, or ETFs. 

Commodity ETF space has expanded with Silver ETF and FoF options. How should an investor place gold and silver in a portfolio? 

Apart from equity and debt, commodities (like gold and silver) have an active role in a portfolio. During inflationary or uncertain times, gold comes to the fore, owing to its role as a hedge against inflation. However, gold tends to go through periods of consolidation, testing investor patience. Those who stay invested tend to gain as the yellow metal is known to deliver sizeable returns in a short span. When it comes to silver, given its low correlation with other asset classes, investors can consider taking exposure to silver as a part of their portfolio diversification. Also, this is one metal that will be in demand, thanks to its wide application across renewable energy, industrials, electronics, etc.

What kind of investor should consider smart beta ETFs? 

Smart beta is an extension of traditional ETFs with the only difference being - stock selection and/or weightage that will exclusively be on the basis of a particular factor. An investor today can choose from a variety of factors such as momentum, low volatility, alpha, and value to name a few. Informed investors can consider putting together a portfolio based on these factors.