ETF Express reported on a couple of ETF launches in India over the last couple of weeks, including the new Bandhan Mutual Fund, which recently announced the name change for all its schemes, following the rebranding of the fund house.
Its recently launched India’s First US Debt (ETF) Fund name has changed to Bandhan US Treasury Bond 0-1 Year Fund of Fund.
Vishal Kapoor, is CEO of Bandhan Mutual Fund, which has USD14 billion in assets and is part of the Bandhan Financial Services group, partly owned by Singapore’s sovereign wealth fund, the GIC.
The asset management arm is in the top 10 of the Indian fund industry and has recently started to offer ETFs.
Kapoor explains that the ETF industry in India has USD60 billion in assets, dominated by institutions who represent USD34 billion of the assets, driven by a government mandate that pension fund or provident fund money must be invested in very secure assets and only through ETFs.
Recent years have seen investment move beyond government bonds into the equity markets but there has been no investment in active managers. “Very large sums of money have built up through contributions to people’s retirement and they have come into ETFs.” Kapoor explains.
The second largest pool of assets in ETFs is the USD22 billion invested by corporations using ETFs to access broad market indices.
Bandhan has two Indian ETFs on the broad Indian indices but this new product is a new initiative, not just for Bandhan, but for India.
The new fund is an open-ended fund of fund scheme investing in units /shares of overseas index funds and/or ETFs which track an index with US treasury securities in the 0-1 year maturity range as its constituents, with funds supplied by J.P. Morgan.
The firm writes that the fund is designed to provide Indian investors with a convenient route to create a USD asset that benefits from the relatively high quality, reasonable safety, and current high yield of US Treasuries.
“It’s interesting because we have created a brand new asset class, and we are using an ETF which gives it an efficient delivery mechanism,” Kapoor says.
The product is aimed at affluent and affluent plus Indian investors who can see the need for global or developed world exposure.
“If you want to participate in US debt in India, the available method is quite cumbersome,” he says. “Using our ETF, you can accumulate in a safe and strong developed market currency for a specific saving need you might have with fees of 12 basis points, so a fraction of the cost.”
Kapoor says that he is very excited to see the response to the product. “It is unique – it’s the first international debt product and it’s not just debt, it’s more security and holding money in US dollars without having to jump through hoops – it’s transparent, convenient and low cost.”
The fund might also attract Indian investors who have a view on the dollar/rupee rate, Kapoor believes.
The firm plans to launch more ETFs with Kapoor saying that they have a slew of other ideas lined up with an equity offering arriving next month. He says that the firm is talking to BlackRock and may add an iShares class to their fund of funds, as they aim to continue to work with ‘best of breed and specific strategies where firms are better suited’.