The chosen AMC will have to launch and manage the debt fund, in collaboration with the government and an external advisor
The government has invited five asset management companies (AMC) to make presentations before it on January 3 to manage India's first exchange-traded fund (ETF), which will hold debt securities of public sector undertakings, Mint reported.
SBI Funds Management, Reliance Nippon Life Asset Management, Edelweiss Asset Management, Aditya Birla Sun Life AMC and UTI Asset Management Co will make their pitch before the Department of Investment and Public Asset Management (Dipam) for the ETF.
The fund houses have to detail their expense structure and their competence is in managing debt funds and stressed assets. "The government is looking for a fund house, which will offer the lowest expense structure and has a long track record of managing large assets of debt and stressed assets. Most fund houses are offering an expense structure as low as 20 basis points and a maximum of 40 bps," a source told the publication.
Dipam had invited AMCs to set-up a debt ETF in November, following an announcement in Union Budget 2018-19. AMCs submitted their bids by December 17, 2018. Only AMCs with debt assets under management (AUM) of Rs 15,000 crore in the September quarter could apply for this.
As underlying instruments, the ETF will reportedly contain bonds, credit notes, promissory notes and debentures issued by central public sector entities. If securities by these entities fall short, only then will government securities be added.
The AMC will have to launch and manage the debt fund in collaboration with the government and an external adviser. Most AMCs, in consideration, have large assets under management, with over 50 percent held in debt funds. Edelweiss is a smaller AMC in that respect, but it is presenting itself as a group, the report said.As the fiscal nears to a close, the government is speeding up divestment processes. It is pruning its stake in many state-run companies, including Telecommunications Consultants India, RailTel Corp India and National Seeds Corp. The Centre had set a divestment target of Rs 80,000 crore for FY19, but has only managed to raise Rs 15,200 crore from stake sales.Not sure which mutual funds to buy? Download moneycontrol transact app to get personalised investment recommendations.