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Insurance Regulatory and Development Authority (Irda) today released a draft on allowing insurers to invest in Equity Exchange Traded Fund (ETF). The regulator has proposed that Equity ETFs would be restricted to schemes of Mutual Funds.
Equity ETFs are funds whose unit price is derived from basket of underlying equity shares. These baskets of securities differ depending upon the nature of ETF. Irda has said that these Equity ETFs in mutual funds should be registered with markets regulator Securities and Exchange Bureau of India (Sebi).
In its draft, Irda has said that investment in Equity ETF would be on the grounds that these ETFs have overall expense ratio below 0.40% of daily net assets. Further, investment in the Equity ETF would be considered investment in mutual funds. These ETFs cannot hold more than 15% of fund in a single company and ensure that total exposure to a sector does not exceed 30%.
The regulator has also said that the Equity ETF should be listed on atleast two Exchanges having nationwide terminals and not have any overseas investments.
