The government's first Debt Exchange Traded Fund, Bharat Bond ETF is set to open on the 12th of December and the NFO will remain open till the 20th. Edelweiss AMC has received the mandate to launch this ETF, which will invest entirely in government PSU bonds.

While giving details about the Bharat Bond ETF Radhika Gupta, CEO, Edelweiss AMC said, “Bharat Bond is structured to mimic in many ways the fixed deposit experience or the fixed maturity plans (FMP) experience in terms of investing for a defined period and having reasonable certainty about the return you are going to earn in that period. In that sense that is a very good comparable.”

Bharat Bond matures and operates like a bond, is diversified like a mutual fund and trades on the exchange like a stock, she said in an interview with CNBC-TV18.

“It is ultimately under the mutual fund regulations - like a debt mutual fund you can redeem and subscribe any day. It is diversified, it is professionally managed, so it is like a mutual fund. It also enjoys the same tax benefits as a mutual fund," she said, adding that since investors are familiar with stocks, it trades on the exchange like a stock.

When asked about the benefits of investing in Bharat Bond ETF vs debt MFs she said, “It is an ETF, so it has an index. Secondly, this will be going to AAA PSUs, so credit quality is the biggest benefit. The biggest benefit is cost, at 0.0005 percent it becomes the cheapest debt fund product in the world probably and definitely the cheapest mutual fund product in India. So saving of 30-50 basis point also is a big for an Indian investors.” It would be beneficial to investors if they hold to maturity, she added.

One other benefit is also that there is no breakage penalties. In the ETF there is no exit load at all. However, in the fund of fund structure there is a marginal exit load under one month. So effectively it is completely liquid and available on the exchange,” she further added.

First Published:Dec 10, 2019 3:27 PM IST