Seven fund houses bid for new CPSE ETF; ICICI MF leads race

Seven asset management companies, including ICICI MF and Reliance MF, today bid for managing the second CPSE Exchange Traded Fund (ETF) comprising stocks of PSUs in the current fiscal with an estimated corpus of Rs 6,000 crore.

The other fund houses that bid for the CPSE ETF were HDFC, SBI, UTI, Kotak and Birla MFs, industry sources said.

Sources added that ICICI MF had put in the lowest financial bid at 0.0095 per cent of the corpus, putting it at the front in the race to manage the second CPSE ETF.

Sources said SBI MF and Reliance MF had scored the highest in technical bidding, but ICICI MF beat other fund houses in financial bidding which gave it the highest overall score in the bidding process.

ICICI MF's bid is even below the 2 basis points, which is required to be kept for investor education fund as per Sebi regulations.

The Government proposes to create and launch a new ETF in addition to the existing CPSE ETF, comprising stocks of listed CPSEs and GoI stake in other corporate entities.

The government had launched the first ever CPSE ETF, comprising scrips of 10 PSUs, in March 2014, under which retail investors have to invest a minimum of Rs 5,000 to buy units. It had then garnered Rs 3,000 crore to the exchequer.

The mandate for managing the first CPSE ETF was given to Goldman Sachs Mutual Fund, which has since been acquired by Reliance MF.

The proposed new ETF will serve as an additional mechanism for the Government to monetise its shareholdings in those CPSEs that eventually form part of the ETF basket. It is estimated to have a corpus of Rs 6,000 crore in the first year, which may go up in the coming years. The mandate for managing the fund is being given for three years.

The ETF could be launched as a New Fund Offer (NFO) followed by Further Fund Offer (FFO)/tap Mechanism/tranche or in other additional offering which the government may deem fit to launch.

"Government may provide appropriate discount for different investors, in the form of a suitable mix of upfront and back-end loyalty discount," the Finance Ministry had said while inviting bids from fund houses.

Sebi-registered mutual funds or asset management companies with at least 5 years of experience of fund management were eligible to place their bids.