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IPO-Bound Fintech Navi Sets Up A Billion-Dollar Metaverse-Focused Fund Of Fund Scheme

IPO-Bound Fintech Navi Sets Up A Billion-Dollar Metaverse-Focused Fund Of Fund Scheme

Navi Technologies, via its mutual fund arm Navi Mutual Fund, has filed the documents with SEBI for a metaverse-focused ETF fund of fund scheme

The fintech will invest the money it receives from investors in overseas ETFs, and the ETFs will fund metaverse-focused companies with the same

The total investment will be to the tune of $1 Bn, invested across multiple ETFs

Navi Technologies, the IPO-bound fintech startup, has set up a metaverse-based Fund of Funds scheme, the Navi Metaverse ETF Fund Of Fund, via its Navi Mutual Fund arm.

The Fund of Fund scheme is sponsored by Anmol Como Broking and will be managed by Navi Mutual Fund. Navi AMC Limited will manage the assets that the Fund of Fund scheme will own.

At Navi, Aditya Mulki, a chartered accountant with experience in managing funds will be the fund manager. Mulki has, so far, handled nine funds across his career.

According to the documents filed by the company accessed by Inc42, Navi Mutual Fund mentioned, “An open-ended fund of fund scheme investing in units of overseas ETFs which provide exposure to companies that are positioned to benefit from the advancement of Metaverse.”

Navi said that the investors will be investing in Exchange-Traded Funds, also known as ETFs, that will be investing in companies that are positioned to benefit from the advancement of the metaverse.

In short, an investor will be asked to invest in a fund that will be used as a fund to invest in metaverse-based companies. Navi has targeted a total scheme corpus of $1 Bn, investing across various funds, with maximum investment in a single ETF being $300 Mn.

The company will offer a NAV unit at the face value of INR 10. For instance, if an investor invests INR 500 in the scheme, they will be allotted 50 units across the ETFs that Navi will be investing in.

Since Navi Mutual Fund will acquire equity shares of these metaverse-focused companies, the risk, of course, is very high.

A Metaverse-Powered Mutual Fund?

According to documents filed by Navi, the investment objective will be to provide long-term capital gains by investing in overseas ETFs and/or Index Fund that in turn invest in startups or other companies that are developing use cases, products, and services related to the metaverse.

To gauge the performance of a company, Navi Mutual Fund will use the Solactive Metaverse Theme Index, as according to Navi, it will “track the performance of companies that have, or are expected to have, significant exposure to the provision of products and/or services that contribute to the metaverse industry, as determined by the index methodology.”

Navi will also invest, to an extent, in debt instruments under this scheme, such as Debt Schemes, Debt & Money Market Instruments, including Tri-Party Repo, G-Secs, Cash and Cash at call, among others. However, this investment will be limited to, at most, 5% of the total amount of the fund.

The company also listed the types of ETFs that it will be participating in. Currently, only two names are locked down – the Roundhill Ball Metaverse ETF, and Proshares Metaverse ETF. The former has a current AUM of $940.5 Mn and invests in seven key categories that enable the metaverse, including networking and virtual platforms.

According to the investment strategy listed by Navi, the company will simply invest in these ETFs and let them handle the further investments across multiple metaverse-based companies. 

However, Navi also said that it might hold a small percentage of the total corpus as cash, or invest in debt and money market instruments permitted by SEBI/RBI including TREPS or an alternative investment for the TREPS.

Should You Invest?

The fund’s returns will look something like this.

Navi Metaverse Fund

Basically, the fund promises a 13.5% return on investment at the end of the year, which is a good performance for a mutual fund.

The fund has a minimum investment value of INR 500, and in multiples of INR 1 thereafter, so, a person can invest a minimum of INR 500, and as much as they like thereafter. The Scheme will be making an investment in overseas ETFs subject to a maximum of $300 Mn per mutual fund, within the overall industry limit of $1 Bn.

However, the fact remains that the fund is labelled at very-high risk, so this is by no means a guarantee that a person investing in the fund will be looking at double-digit returns.

Navi has not yet offered the NFO schedule for this metaverse fund, however, it has set a target to invest $60 Mn during the said NFO.

The Growing Influence Of The Metaverse

India’s IT giants have clearly stated their intent of harnessing the opportunity that the metaverse presents. With the focus shifting towards digital and mixed reality experiences driven by technology, the metaverse is the future of immersive user and enterprise experiences.

Across the world, some of the largest, most powerful tech companies are working to develop what they think the metaverse should look like. Facebook has just gone all-in recently, with the company changing its name to Meta, to reflect its focus.

Similarly, Apple, Microsoft, and Google are all working on AR-enhanced web experiences and the metaverse within their apps and devices ecosystems.

Of course, given how big of a monetisation opportunity it represents – with being the OS of Web 3.0 and all – it is obvious why every tech company is talking about the metaverse.

Recently, there has been a flurry of activity around metaverse-centred startups in India. Indian metaverse startup Ikonz has raised undisclosed seed funding from early-stage VC firm Village Global and technology investment firm Woodstock. 

Village Global is backed by Microsoft’s Bill Gates, Amazon’s Jeff Bezos, Meta’s Mark Zuckerberg, Google’s Eric Schmidt, LinkedIn’s Reid Hoffman, Disney’s former CEO Bob Iger, Bloomberg’s Mike Bloomberg and VMware’s Diane Green, among others. 

Also, healthtech startup GOQii Inc. raised $10 Mn in an extended Series C equity round from Animoca Brands to launch its health metaverse. Further, digital collectables-focussed startup FanCraze raised $100 Mn in a funding round and the raised capital would be used to fund the expansion of the startup’s metaverse across the cricket landscape.

With the advent of metaverse globally, the Fund of Fund scheme might reap unprecedented rewards for the investors and Navi alike, but since it is too early to say, the risk of it all coming crashing down is also equally high.

Right now, it is a $1 Bn coin toss.