India bond ETF assets grow by a third after index inclusion announcement

Assets under management of Indian government bond-specific exchange traded funds have gone up by a third after JPMorgan's September announcement on adding the debt to its indexes, and fund managers expect a further pick up in flows as the inclusion nears.
 

"Since the inclusion announcement, we have seen some inflows and are hopeful to receive new flows from end of June," Lee Collins, head of index fixed income at Legal & General Investment Management (LGIM) said.
 

LGIM pioneered and launched an Indian government bond-dedicated ETF in October 2021, which currently has around $700 million of assets, making it the largest of the five such ETFs.
 

 

Assets of these ETFs have risen to $803 million from $599 before the index announcement, data compiled by Reuters showed.

Indian government bonds will be included in JPMorgan's emerging market index from the end of this month. India's sovereign bonds have attracted nearly $10 billion in inflows since September.
 

ETFs AUM before announcement Latest AUM (in $ mln) (in $ mln) LGIM 540 700 UTI 3 13 DWS 56 63 Tabula Did not exist 1 Blackrock Did not exist 26 Total 599 803 Most JP Morgan index clients are set up to invest directly in Indian government bonds.

Those not registered to trade directly may opt to invest via ETFs.
 

BlackRock, the world's largest fund manager, launched its India bond ETF in February.
 

"Investors that have not yet managed to get their registrations or have started the process and may not be able to complete it before the deadline, can access our ETF, which is an efficient tool to gain access," Jason Smith, chief investment officer at Tabula Investment Management said.
 

Tabula aims to expand the size of its fund to around $250 million to $500 million in coming months from around $1 million currently.
 

Officials at fund houses like DWS and UTI International said they have stepped up marketing efforts to draw new investors.

"We are getting more into marketing, changing gears and hopefully we should see more assets... potentially the ETF could be a few hundred million dollars," UTI International CEO Praveen Jagwani said.
 

The ETFs differ in what parts of the government bond market they are buying into.
 

The average duration of LGIM's India bond holdings is around seven years, while Tabula is focused on less-than-five year bonds.
 

UTI is focused only on the top seven most liquid government securities.


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