Bharat Bond ETF: Edelweiss Mutual Fund launches India’s first Corporate Bond exchange-traded fund

Bharat Bond ETF: Edelweiss Asset Management Company (AMC), a Group company of Edelweiss today announced the public issue of India’s first Corporate Bond ETF called the Bharat Bond ETF (Exchange Traded Fund). This ETF is an initiative of the Government of India, from the Department of Investment and Public Asset Management and the latter has given the mandate to Edelweiss AMC to design and manage the product. The issue period of this Bharat Bond ETF launched by Edelweiss AMC will remain open for subscription from 12th December 2019 t0 20th December 2019. The Bharat Bond Exchange Traded Fund or ETF will invest in AAA-rated Public Sector Bonds. Its minimum unit size will be Rs 1,000. Bharat Bond ETF units will be listed and tradable on exchanges. It will track the Nifty BHARAT Bond Target Maturity Indices. BHARAT Bond Funds of Funds (FOF) is also being launched for investors who do not have Demat accounts.

BHARAT Bond ETF provides the best features of Mutual Funds, ETFs and Bonds. It provides safety because it consists of a high-quality basket of public sector companies, liquidity and access at a much lower ticket size, compared to investment in individual bonds.   BHARAT Bond ETF is also the lowest cost mutual fund product in India and the cheapest bond ETF/fund in the world. If a retail investor invests 2 lakhs in Debt ETF’s, the AMC will be charging a management fee of just one rupee. 

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Speaking on the Bharat bond ETF launch Nitin Jain, CEO at Edelweiss Global Investment Advisors said “We are honoured that the government has given us the mandate to manage India’s first corporate bond ETF.  The government’s initiative to launch this product will help to deepen the corporate bond market and provide a very low cost, tax-efficient debt product that is ideally suited for retail investors. The product has been developed after more than a year of deliberations between DIPAM, Edelweiss and NSE and has truly disruptive potential.’’

Radhika Gupta, CEO, Edelweiss Mutual Fund said, "The Bharat Bond ETF has a unique target maturity structure that is designed for the needs of Indian fixed income investors, who want predictability of returns in their debt investments. The ETF combines the benefits of three products – it is diversified like a mutual fund, trades on the exchanges like a stock and matures like a bond. It will lead over the years to the development of a complete yield curve of high-quality public sector bonds, bringing transparency in bond pricing.   Borrowers will now have a wider range of tenors in which to borrow, and investors a full range of debt products to match their investment time horizons.”

The Bharat Bond ETF will help to deepen the corporate bond markets and enhance retail participation. The 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 3000 crores with a greenshoe option of 2000 crores in the 3-year maturity period (2023) and 4000 crores with a greenshoe option of 6000 crores in the 10-year maturity bucket (2030).

Globally Bond ETFs have grown at a healthy pace in the last decade, primarily due to lower costs compared to traditional bond funds. Bond ETF AUM globally is around $1 trillion. Total ETF AUM across all asset classes is at around $4 trillion.