Business

Flurry of ETF launches on the anvil

Exchange traded funds or ETFs seems to be the flavour of the season. Three different asset managers have filed documents with the regulator to launch new exchange traded funds in 2015.

The number of such filings have risen to three in March and five since the beginning of the year; the SBI ETF 10 year Gilt filed on Monday being the latest one.

Others include the ICICI Prudential Bank ETF, the R*Shares CNX Midcap ETF, the R*Shares NV20 ETF, and the Reliance MSCI India Domestic ETF.

“The investment objective of the scheme is to provide investment returns closely corresponding to the total returns of the securities as represented by the MSCI India Domestic Index before expenses, subject to tracking errors,” according to the draft documents of the Reliance MSCI India Domestic ETF.

“The investment objective of the scheme is to provide returns before expenses that closely correspond to the total return of the underlying index…the S&P BSE Bankex Index,” said the filing of the ICICI Prudential Bank ETF.

An exchange traded fund typically holds securities in the same proportion as the index it tracks. It is a passively managed fund, which means that it does not seek to take active calls on which stock or security will outperform, merely attempt to replicate the performance of its benchmark.

The ETF market has been limited in India. An estimate last year put the assets of Indian equity ETFs at a tenth of India-dedicated ETFs located abroad.

This has been driven by the outperformance of actively managed funds. Seven out of ten mutual fund schemes beat their benchmark, according to an earlier analysis by Business Standard.