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Edelweiss MF launches Bharat Bond ETF; offer to end on December 20

Indices will comprise 15 PSU constituents such as Indian Oil Corp, Hindustan Petroleum Corp, REC, PFC, NTPC, NHPC, among others.

December 12, 2019 / 04:16 PM IST

Edelweiss Mutual Fund on December 12 launched the new fund offer of India's first corporate bond ETF (exchange-traded fund) called Bharat Bond ETF.


Subscription to this scheme will remain open until December 20.

This ETF is an initiative of the Government of India, from the Department of Investment and Public Asset Management (DIPAM).


The  DIPAM had given the mandate to design and manage the Bond ETF to Edelweiss Mutual Fund.


The Bharat Bond ETF will have a definite maturity period, just like the one for a closed-end mutual fund scheme. ETF units will be listed on stock exchanges.

An ETF is a mode of investment that comprises a basket of stocks or bonds that are traded, similar to individual stocks, on an exchange during regular trading hours. An ETF is comparable with an index fund, except that the ETF is listed on the stock exchange and is traded.


The scheme will have two variants - one maturing in three-years (2023) and the other in 10 years (2030).

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The ETF with a three-year maturity will follow the Nifty Bharat Bond Index-April 2023 and the other is one with a 10-year maturity will follow the Nifty Bharat Bond Index-April 2030.

As on Dec 5,2019, the yield of Nifty Bharat Bond Index-April 2023 was 6.69 percent and Nifty Bharat Bond Index-April 2030 was 7.58 percent, The minimum unit size of this fund is capped at Rs 1,000.

These indices will comprise 15 PSU constituents such as Indian Oil Corp, Hindustan Petroleum Corp, REC, PFC, NTPC, NHPC, among others.

Commenting on the launch, Radhika Gupta, Chief Executive Officer, Edelweiss Mutual Fund, said: "The biggest benefit is cost (expense ratio), at 0.0005 percent it becomes the cheapest debt fund product in India. The ETF combines the benefit of three products—it is diversified like a mutual fund, trades on the exchange like a stock and matures like a bond."


This ETF will invest only in AAA-rated bonds of Public Sector companies.


Through the ETF, Edelweiss Mutual Fund proposes to raise an initial amount of Rs 3,000 crore with a green shoe option of Rs 2,000 crore in the three-year maturity period (2023), and Rs 4,000 crore with a green shoe option of Rs 6,000 crore in the 10-year maturity.

Portfolio allocation towards Bharat Bond ETF could be in the range of 10-20 percent, depending on the risk profile of investors.

The government has a two-fold objective for launching Bond ETF.


This ETF will help deepen the liquidity of the Indian debt markets and provide a gateway for participation of retail investors.


Additionally, it will help the underlying government-owned companies to raise funding for their operations.


Globally Bond ETFs have grown at a healthy pace in the last decade, primarily due to lower costs compared to traditional bond funds.

The AUM of Bond ETF globally is around $1 trillion, while the total ETF AUM across all asset clases is at around $4 trillion.

Moneycontrol News
first published: Dec 12, 2019 03:32 pm

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