ZyFin to list world’s first Indian fixed income ETF on LSE

Nov 16th, 2015 | By | Category: Fixed Income

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ZyFin, a Singapore-headquartered asset manager with advisory operations based in India, has announced that the imminent listing of the world’s first Indian fixed income exchange-traded fund, the LAM Sun Global ZyFin India Sovereign Enterprise Bond UCITS ETF (CURY LN), on the London Stock Exchange.

ZyFin to list world's first Indian fixed income ETF on LSE

ZyFin’s ETF invests in the the bonds of Indian SOEs which play a major role in the development of India’s infrastructure.

The ETF will offer international investors exposure to the fixed income securities of Indian Sovereign Owned Enterprises (SOEs) which are corporations of national interest and are at least 51% owned by the Government of India. The fixed income ETF will be Europe’s first physically replicating Indian ETF.

According to ZyFin, Sovereign Owned Enterprises play a major role in India’s infrastructure development and include the likes of the Indian Railways, Power Finance Corporation and Rural Electrification Corporation of India.

The diversification of the Indian bond market is one of many initiatives being undertaken by the Government of India to attract foreign direct investment into the country. The broadening of the investor base to include foreign portfolio investments, such as the Sun Global Zyfin SOE Bond ETF, has been recognised as an important step forward to help develop India’s corporate bond market.

Sanjay Sachdev, Executive Chairman at ZyFin, commented: “This is the first time global investors will have access to AAA-rated government-owned Indian companies through an ETF, and with the Indian government keen to stimulate outside investment, this is a very exciting time to be investing in the country.  India’s GDP has doubled in eight years from $1 trillion in 2007 to $2 trillion in 2015 and the IMF forecasts GDP growth of 7.3%. There is clearly still a strong case for the continued strength of Indian domestic consumption.”

The investment policy of the ETF is to track the performance of the ZyFin India Sovereign Owned Enterprise Bond Index, which is based on ZyFin research. The index draws its constituents from the highest credit rated SOE issues in its eligible universe. Eligible bonds must be rated AAA or equivalent and components are selected based on aggregate traded value in the last calendar month. The index will have six constituents, each receiving an equal weight, with no more than one security from a single issuer eligible for the index at any one time.

The ETF provides exposure to corporate bonds which have an average duration of over 10 years and although partly state owned, yield higher than an Indian Sovereign Bond at around 7%.

The fund will be distributed and traded by Sun Global Investments, a London-based wealth management firm. Mihir Kapadia, CEO at Sun Global Investments, said: “As a London–based FCA regulated company, we are very pleased to partner with ZyFin and work with the London Stock Exchange to provide global investors with an efficient way to invest in bonds issued by high-quality Indian state-owned companies.  This venture shows the versatility, creativity and flexibility of the financial sector in London and the investment opportunities available as a result of the rising economic growth in India.

“The listing of this fund reflects our view that Indian nominal yields are among the highest in the world. With India expected to overtake China next year as the world’s fastest growing economy, we are confident that new investment innovations such as ours will help reinforce its growth trajectory.”

The planned listing date for the ETF is 19 November 2015 and the estimated total expense ratio is 0.79% per annum. The primary listing of fund is on Xetra which began trading on 17 November.

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