The Bharat Bond ETFs of different maturities are the biggest fixed income exchange traded funds (ETFs) in India. Bharat Bond ETF is an initiative of Department of Investment and Public Asset Management (DIPAM), under the Ministry of Finance. The funds are managed by Edelweiss AMC.“To reach a goal you have never before attained, you must do things you have never before done”, was the motto of Edelweiss Mutual Fund, the asset management company of the Bharat Bond ETFs. Edelweiss MF launched the first tranche of Bharat Bond ETFs in late 2019, Bharat Bond ETF – April 2023 and April 2030.
Pioneer in Corporate Bond ETFs
With the launch of Bharat Bond ETFs – April 2023 and April 2030, Edelweiss achieved several firsts:-
- Bharat Bond ETFs were the first exchange traded funds which invested in corporate bonds. Fixed income ETFs, prior to the launch of Bharat Bond ETFs invested mostly in Government Securities (Gilts) and money market instruments like Tri Party Repos (TREPs). Bharat Bond ETFs invest in bonds issued by Public Sector Undertakings (PSUs).
- Bharat Bond ETFs were the first instance of the Government raising debt financing for the PSUs through the ETF route. Since then, Edelweiss Mutual Fund has launched four ETFs of various maturities under the Bharat Bond ETF series in two tranches, garnering assets of Rs. 36, 359 Cr. as of October, 2021.
- The first tranche of Bharat Bond ETF was the first target maturity ETF in India. A target maturity fund has a defined maturity date and upon maturity you will get back your investment proceeds along with accrued returns. Target maturity funds are very popular in developed markets. Following Edelweiss’ lead several AMCs have now launched target maturity ETFs in India.
Four existing Bharat Bond ETFs
Third tranche of Bharat Bond ETF
Edelweiss MF plans to launch the third tranche of Bharat Bond ETF, Bharat Bond ETF – April 2032 through a New Fund Offer that is launching on 3rd December and closing on 9th December 2021. This Bharat Bond ETF tranche may help the Government mobilize around Rs 5000 crores of debt financing for the PSUs. The fund will have a defined maturity i.e. April 2032. The fund will track Nifty Bharat Bond Index – April 2032.
Where will the fund invest?
- The fund will invest in AAA rated PSU bonds. As such, the credit qualities of these bonds are very high.
- The fund will aim to buy the bonds and hold them till maturity. All the bonds in the ETFs will mature within 12 months prior to the maturity of the index i.e. April 2032.
- The weight of each issuer in the fund will depend on the bond outstanding or issue size. Exposure to a single issuer will be capped at 15%. The table shows the constituents of the Nifty Bharat Bond Index – April 2032.
Source: Edelweiss MF
- The fund will be rebalanced quarterly.
How to invest in Bharat Bond ETF – April 2032?
- You can invest in Bharat Bond ETF – April 2032 by subscribing to the NFO during the offer period. You need demat and trading accounts to invest in Bharat Bond ETF.
- After the NFO period, the fund will be listed on the stock exchange. You can invest in the ETF at prevailing market price through your broker after the NFO.
- You can also buy or sell your Bharat Bond ETF units directly with the AMC i.e. Edelweiss MF, if you are transacting in basket sizes as specified by the AMC (refer to the scheme related documents).
- If you do not have demat and trading accounts, then you can invest in Bharat Bond ETF Fund of Fund (FOF) – April 2032. You can invest and redeem Bharat Bond ETF FOF – April 2032 just like any open ended mutual fund scheme. However, the expense ratio of Bharat Bond ETF FOF – April 2032 will be higher than Bharat Bond ETF – April 2032.
Why invest in Bharat Bond ETF / Bharat Bond ETF FOF – April 2032?
- Predictable and stable returns on maturity. Please note however, that the AMC will not provide any assurance of capital safety or guarantee of returns. The performance on your investment will depend on the performance of the benchmark index subject to tracking errors.
- Readers familiar with this blog know that PSUs enjoy quasi sovereign status since the Government has majority ownership in these companies. Since the fund will invest in AAA rated PSU bonds, there is high degree of safety from a credit risk standpoint.
- Daily disclosure ofportfolio constituents and real-time NAV periodically through the day. You can find the live NAVs on https://www.bharatbond.in/.
- The total expense ratios (TERs) are much lower than actively managed mutual fund schemes. The TER of this ETF will be much lower than actively managed corporate bond funds.
- You can buy / sell units of the ETF on the stock exchange at any time (during trading hours) giving you high liquidity. You can also buy / sell your units with the AMC if you are transacting in lot sizes.
- If you do not have a demat account, you can invest in Bharat Bond ETF FOF – April 2032. Investments and redemptions in Bharat Bond ETF FOF – April 2032 will be like any other open ended mutual fund scheme.
- If you have investment horizon of more than 3 years, you can get benefits of long term capital gains taxation. Long term capital gains in debt schemes are taxed at 20% after allowing for indexation benefits.
Investors should consult with their financial advisors if Bharat Bond ETF – April 2032 or Bharat Bond ETF FOF – April 2032 will be suitable for their investment needs. For more details on the NFO please click here -https://bit.ly/3I50zCW or consult with your financial advisor.
Mutual Fund Investments are subject to market risk, read all scheme related documents carefully.