ETFs have become a preferred vehicle for parking the long-term money
 |
Mayuresh Joshi is Fund Manager at Angel Broking
|
Last week, the government announced Bharat 22 ETFs, an exchange traded fd of 22 large cap shares. While the composition includes mostly profit-making, dividend paying public sector companies, the government is also including some shares of blue chip companies like ITC, Larsen & Toubro and Axis Bank held under the Special Undertaking of Unit Trust of India or SUUTI.
The government observed in the release that over the past 3 years to June 2017, assets under management of exchange traded funds in India surged five times to just under Rs 54,000 crore. The release also emphasized that exchange traded funds or ETFs are a popular class of funds globally. Assets under management are expected to grow to $7 trillion by 2021 from $4 trillion today. There is merit in the argument the government has made in the press release.
ETFs have become a preferred vehicle for parking the long-term money. Sovereign Wealth Funds and Pension Funds worldwide love them. While the average cost of fund management is high in active funds, it is much lower in exchange-traded funds. At the same time, they are relatively less risky with well-defined assets under management. The liquidity of these funds is also high since they are listed on stock exchanges.
So if you make a checklist of investments, ETFs tick most of the boxes.
The government's move to create Bharat 22 will allow it to raise money for meeting the disinvestment target. The budget estimate puts it at over Rs 72,000 crore. So far, in 2017-18, it has only managed to raise Rs 9,300 crore. The timing is just about right if they launch it now. This is because stock markets are at a record high and new investors attracted to India are looking for assets like blue chip company shares. The government could raise a significant amount of money by transferring some of the direct holding to the ETF. The release issued last week does not comment on the timing and the amount the government proposes to receive through this....
No comments:
Post a Comment