It looks like the government of India is set to debut its first bond exchange-traded fund (ETF), which will be launched by investment firm Edelweiss Asset Management. The ETF will come in two flavors—one with a 3-year note and the other a 10.
“Called the Bharat Bond ETF, Edelweiss Asset Management will launch it soon, after nearly two years of deliberation with the government of India,” a Money Control article reported. “The former finance minister Arun Jaitley had made announcements relating to bond ETFs in his Budget speech of 2018. Now, here is a low-down on the structure of the product and some pointers for investors to benefit from.”
“The Bharat Bond ETF will have a definite maturity period, just like the way a closed-end mutual fund scheme has. Of course, the ETF units will be listed on the stock exchanges,” the report added. “In her first and exclusive chat with Moneycontrol, Radhika Gupta, the chief executive officer of Edelweiss AMC said that the bond ETF will have two variants – one scheme maturing after three years (2023) and another after 10 years (2030). Only the growth option would be available to investors. There would be no dividend option in these schemes.”
The ETF strategy will come with a definite maturity date as opposed to an open-ended strategy that invests in bonds of various maturities—short-term debt issues, long-term, ultra-short, and so forth. Edelweiss said the scheme with the definitive maturity date suited Indian investors best.
“Indian investors, who typically invest in fixed-income securities, need to know, even if indicatively, as to how much returns they can make,” Radhika said.
Other India-Focused ETFs to Consider
Investors looking broad-based exposure to India can use the iShares MSCI India ETF (INDA ). INDA seeks to track the investment results of the MSCI India Index composed of Indian equities, which measures the performance of equity securities of companies whose market capitalization, as calculated by the index provider, represents the top 85% of companies in the Indian securities market.
Short-term traders looking for leverage can use the Direxion Daily MSCI India Bull 3x ETF (INDL ). INDL seeks daily investment results equal to 300% of the daily performance of the MSCI India Index, which is designed to measure the performance of the large- and mid-capitalization segments of the Indian equity market, covering approximately 85% of the Indian equity universe.
Bonds Set to Close Out 2019 with Another Banner Year
As 2019 comes to a close, it’s going to be another banner year for bonds, which have moved higher along with stocks thanks to an uncertain economic backdrop that saw investors pile heavily into bonds, especially during the summer.
“As 2019 begins to draw to a close, investors are looking at how their investment portfolios have performed,” wrote Dan Caplinger in Motely Fool. “For the most part, stock investors have to be pleased with how the year has gone, with returns of close to 25% for the S&P 500 and many individual stocks having shown even bigger gains.”
“Yet what’s surprising is that in a year in which stocks are performing well, the bond market has also managed to produce solid returns,” Caplinger added. “As you can see below from the year-to-date returns of various iShares bond ETFs, those who invested their money in Treasury bonds with longer maturities got rewarded handsomely, while even investors who opted for lower-risk short-term Treasuries still managed to see gains for the year.”
Investors who have stuck with the common 60-40 portfolio mix, 60% stocks and 40% bonds, have been reaping the rewards of the duality in gains for both asset classes.
“As investors look at 2020, many believe that 2019’s strong returns for bonds aren’t likely to repeat. Yet the bond market has defied calls for an imminent implosion for years, and those who’ve stuck with an asset allocation model that includes both stocks and bonds have been richly rewarded.
Opting for Quality Debt
When playing in the fixed income exchange-traded fund (ETF) market, it’s best for investors to opt for quality debt. Investment-grade corporate bond-focused fixed-income ETF options include the iShares Intermediate Credit Bond ETF (CIU ), iShares iBoxx $ Investment Grade Corp Bd ETF (LQD ) and Vanguard Interm-Term Corp Bd ETF (VCIT ).
Investors looking for broad-based core bond exposure can look to a fund like the iShares Core US Aggregate Bond ETF (AGG ). What’s under the hood of this ETF that gives investors the much-needed core bond exposure, especially in today’s volatile market?
Fund Facts:
- AGG seeks to track the investment results of the Bloomberg Barclays U.S. Aggregate Bond Index.
- The index measures the performance of the total U.S. investment-grade bond market.
- The fund generally invests at least 90% of its net assets in component securities of its underlying index and in investments that have economic characteristics that are substantially identical to the economic characteristics of the component securities of its underlying index.
Investors looking to gain broad-based exposure to bonds can look at funds like the ProShares S&P 500 Bond ETF (SPXB). The fund seeks investment results that track the performance of the S&P 500®/MarketAxess Investment Grade Corporate Bond Index, which consists exclusively of investment-grade bonds issued by companies in the S&P 500.
This article originally appeared on ETFTrends.com.
