Edelweiss to launch India’s first bond ETFs

Dec 5th, 2019 | By | Category: Fixed Income

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Mumbai-based investment manager Edelweiss Asset Management is preparing to launch India’s first fixed income ETFs.

Edelweiss to launch India Bharat Bond ETF

The funds will provide exposure to three and ten-year debt issued by government enterprises in India.

The firm is listing two so-called Bharat Bond ETFs on the National Stock Exchange of India (NSE) providing exposure to three-year and ten-year debt issued by government-linked enterprises.

The funds will be structured as ‘target maturity’ ETFs meaning that, instead of trading in and out of bonds to maintain a target duration exposure, the funds will hold their underlying bonds until maturity at which point they will liquidate.

The ETFs will be linked to new indices developed by NSE Indices, namely the Nifty Bharat Bond Index-Apr 2023 and the Nifty Bharat Bond Index-Apr 2030.

Each index includes only AAA-rated bonds from at least eight different issuers, and no single issuer may hold a weight greater than 15%.

For investors planning to hold the funds until maturity, the three- and ten-year indices are currently offering yields of approximately 6.7% and 7.6%, respectively.

According to Edelweiss, the firm plans to launch new three- and ten-year ETFs in succeeding years which will over time create a full suite of ETFs with different annual tenors between one and ten years.

The roll-out of Bharat Bond ETFs is expected to boost funding for the participating government-linked enterprises by enhancing retail participation in the companies’ bonds, while also helping the government offload its stake in several companies by selling the underlying bonds directly to the ETF basket.

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