LGIM Launches Local Currency Indian Government Bond ETF

The £ 1.3 billion London asset manager said the fund would allow UK and European investors to access India’s growing local currency government bond market.

The fund is listed on the London Stock Exchange, Deutsche Börse and Borsa Italiana and will track the performance of the JP Morgan India Government Fully Accessible Route (FAR) Bonds index.

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The Indian sovereign bond market has grown rapidly in recent years and is expected to continue to grow over the next decade, LGIM said.

According to the fund manager, the investment grade market offers a significantly higher yield than that of developed market treasury bills and has historically displayed an attractive risk / reward profile.

India’s larger bond market is open to foreign investors, but has seen inflows of less than $ 40 billion over the past 10 years, although Morgan Stanley forecasts inflows of between $ 170 billion and $ 250 billion over the course of the year. of the next decade.

LGIM noted that ETF investors could benefit from diversification into other fixed income markets as there has been little correlation between Indian local currency bonds and other emerging market debt. and in development.

“Clear progress has been made by Indian authorities to allow easier access for foreign investors and the country is on track to be included in major bond indices. We believe the time is right to bring this product to investors, ”said Lee Collins, head of index fixed income at LGIM.

“This ETF will provide investors with access, for the first time, to Indian government bonds in local currency via a liquid, transparent and regulated UCITS vehicle,” added Collins.

“India is the second largest emerging market and the sixth largest economy in the world, and investors can benefit from access to a growing sovereign bond and investment grade bond market with attractive yields and potential diversification through compared to other fixed income markets. “

James Crossley, UK Retail Sales Manager at LGIM, said: “Through its UCITS structure, the fund will provide investors with easy access to a complex and highly regulated market, without having to deal with a complex currency. or hire a local tax advisor or broker. It can also provide significant liquidity, even in times of market stress, by trading in both the primary and secondary markets. “

The fund will be available to investors for a total expense ratio of 0.39%.

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