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LGIM launches local currency India government bond ETF


The £1.3trn London-based asset manager said the fund will allow UK and European investors to access India’s growing local-currency government bond market.

The fund is listed on the London Stock Exchange, Deutsche Börse and Borsa Italiana and will track the performance of the JP Morgan India Government Fully Accessible Route (FAR) Bonds index.

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India’s sovereign bond market has rapidly expanded in recent years and is anticipated to grow further over the next decade, LGIM said.

The investment-grade market offers a significantly higher yield than developed market treasuries, according to the fund manager, and has historically boasted an attractive risk/return profile.

India’s wider bond market is open to foreign investors but has seen flows of less than $40bn in the last 10 years, though Morgan Stanley predicts inflows of between $170bn to $250bn during the next decade.

LGIM noted that investors of the ETF could benefit from diversification in other fixed-income markets given that there has been little correlation between local-currency Indian bonds and other emerging and development-market debt.

“Clear progress has been made by the Indian authorities to allow easier access for foreign investors and the country has been on a path to be included across major fixed income indices. We think it is now an appropriate time to offer this product to investors,” said Lee Collins, head of index fixed income at LGIM.

“This ETF will enable investors to access, for the first time, Indian government bonds in local currency via a liquid, transparent and regulated UCITS vehicle,” Collins added.

“India is the second biggest emerging market and the sixth largest economy in the world, and investors can benefit from accessing a growing sovereign bond and investment-grade market with attractive yields and potential diversification from other fixed income markets.”

James Crossley, head of UK retail sales at LGIM, said: “Thanks to its UCITS structure, the fund will give investors easy access to a complex and a highly regulated market, without having to deal with a complex currency or hire a tax adviser or local broker. It can also provide meaningful liquidity, even in times of market stress, by trading in both the primary and secondary markets.”

The fund will be available to investors for a total expense ratio of 0.39%.



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