The central government has entered the last lap of in the process of launching the Central Public Sector Enterprises Exchange Traded Fund (ETF). The fund, which some estimates say could be as big as Rs 30,000 crore, is part of the government’s plan to encash parts of its shareholdings in some 50 public sector enterprises in a time-bound manner. The department of disinvestment has initiated the search for appointing a fund manager for this mega fund.
In a request for proposals floated on Friday, DoD called for “SEBI registered mutual funds / asset management companies” with at least 5 years’ experience of fund management, and average Equity / ETF assets under management “of not less than Rs. 2,500 crore in India.”
ICICI Securities is advising the government on the entire process.
The DoD wants the fund manager selected to provide “inputs on the various options suggested for structuring the CPSE Basket including but not limited to the terms of composition of stocks, weightages, and methodology followed etc.
The fund manager also will be responsible for various compliance and regulatory requirements that precede the launch of the new fund offer of the ETF.
Government also wants the manager to leave no stone unturned in marketing the scheme to the investors. “The selected AMC / ETF provider shall incur marketing / advertising expenses to the extent of at least Rs. 15 crore, under NFO expenses, for the CPSE ETF. The AMC / ETF Provider may incur marketing expenses under NFO expenses, over and above this stipulated amount. The key expenditure heads and the item-wise amounts to be spent under this head shall be finalized and approved by the Government, in consultation with the AMC and the Advisor.”
The winning bidder is likely to be determined based on a combination of technical and financial parameters. In the financial parameter funds are asked to specify the percentage of weekly assets they will charge as expense ratio.
While this ratio will be applicable up to assets of Rs 5000 crore, for the next Rs 10,000 crore AMCs will be able to charge 80% of this ratio. For assets over Rs 15000 crore, the fund can charge 60% of the expense ratio bid for, the bid documents said.
