UTI International has launched an Indian Government Bond ETF listed on the Amsterdam Stock Exchange.
The sovereign bond ETF will track performance of the Nifty India Select 7 Government Bond index, which comprises of top seven most-liquid, local currency sovereign bonds issued by the Centre.
The index has been specifically created by NSE Indices. The index methodology is uniquely designed for global investors considering favourable factors such as high secondary market liquidity, high unutilised limits for Foreign Portfolio Investors and also giving preference to government bonds categorised under the Fully Accessible Route by RBI. BofA Securities has provided seed capital and has been appointed as Authorized Participant.
The UTI India Sovereign Bond ETF is domiciled in Ireland and structured in compliance with the European regulatory framework of UCITS (Undertaking for Collective Investments in Transferable Securities).
The investment manager of the ETF is UTI International, the Singapore-based subsidiary of UTI Asset Management Company.
This ETF will allow global investors to access India’s vibrant government securities market without having to deal with the complex access procedures typically associated with Indian fixed income.
Vibrant bond market
As India becomes increasingly relevant on the global investment landscape, investors will seek Indian yield in addition to equity returns. While India is presently not included in global fixed income benchmarks, this ETF could mark an inflection point in recognition of India’s bond markets.
Imtaiyazur Rahman, CEO of UTI AMC said the ETF will connect the country's fixed income markets with the world and drive global investments to India.
Vikram Limaye, Managing Director and CEO, NSE said innovation in financial products is important for the development of Indian capital markets and the product provides a play at the intersection of yield and liquidity – two key variables for global investors.
It is an important stepping stone towards attracting global money in Indian government securities market through the ETF route, he said.
Jayesh Mehta, Managing Director & Country Treasurer, Bank of America N.A., India said India is one of the last remaining large investment grade rated economies whose sovereign bonds are under-owned by institutional investors.
The ETF structure will raise market awareness of Indian sovereign bonds as an asset class and improve accessibility at a time when global investors are seeking to diversify yield opportunities, he added
The ETF will be listed on Euronext Amsterdam AEX initially and then possibly other exchanges in Europe and Asia.