Bond Exchange Traded Funds

Bond Exchange Traded Funds

Government of India has decided to appoint advisors for creation of Bond Exchange Traded funds market.   This will be similar to the Stock Exchange Traded Funds market.  This would pave way for enhancement in liquidity under debt investments and expand scope for retail savings.   Further details related to this are:

  1. An RFP (Request for Proposal) to appoint advisors for creation of a Bond ETF market had been floated.
  2. This would be a competitor for the stock ETF market in their depth and maturity overseas. The bidding has closed on 16th May 2018.
  3. Though the actual number of bidders and their names are not revealed, it is understood that Mumbai based Trust Capital is in the prey which ofcourse not confirmed by the  Department of Investments and Public Assets Management (DIPAM).  Also, there is a possibility of Trust Capital being the only bidder.
  4. Though some mutual funds and domestic investment bankers showed interest in the bid, many entities with multiple financial services on offers have not found the option to be attractive. This is possibly because, taking up the role of an advisor might affect the role of being a Fund Manager in the later years.

Salient Features of Bond Exchange Traded Funds market

  1. It should cater to the needs of Central Public Sector Enterprises, Public Sector Banks and also Public Sector units through leveraging of their aggregate strength.
  2. Bond ETFs also permit retail and institutional investors to take exposure in a larger pool of fixed income securities than they could normally could have an access.
  3. Here multiple bonds are clubbed in smaller chunks defined by the ETF price and size which would cater to all needs.
  4. Also, Bond ETFs are expected to assist in enhancement of debt market liquidity.


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