European ETF provider Tabula Investment Management Limited has launched an ETF providing international investors with liquid access to investment grade Indian government bonds.
The fund, Tabula FTSE Indian Govt Bond Short Duration Ucits ETF, provides investors with an entry into the world’s fifth-largest and rapidly growing economy. With a current yield of 7.1%, the ETF invests in Indian Rupee (INR)-denominated government bonds issued by the Reserve Bank of India.
Tabula’s fund aims to track the FTSE Indian Government Bond FAR Short Duration Capped Index, focusing on the 0.5 to 5-year segment of the market and excluding long-duration bonds that offer limited yield pickup.
The ETF mirrors the FTSE Indian Govt Bond FAR Short Duration Capped Index. The index emphasises investment-grade INR-denominated bonds, enforcing a liquidity filter with a minimum notional outstanding requirement of INR 250bn (US$3 billion). Each bond in the index is capped at a maximum of 25%, and there must be a minimum of six bonds in the index.
The fund is listed on the London Stock Exchange and has a total expense ratio of 0.39%.
In September 2023, JP Morgan announced the inclusion of India’s local bonds in its Government Bond Index-Emerging Markets from June 28, 2024.
Michael John Lytle, CEO, Tabula, commented. “Until recently, the Indian government bond market has been difficult to access, with foreign investment limited. These restrictions were relaxed in 2020 with Fully Accessible Route (FAR) bonds open to foreign investors. FAR bonds account for over 20% of this US$1.1tn market and include all new issues of 5, 10 and 30-year bonds.”
The offering targets the 1-5 year market segment, generating nearly the same yield as the broad market index, which currently allocates around 66% to bonds with maturities over five years. This approach reduces duration risk significantly for investors, according to the firm.
Stefan Garcia, chief commercial officer at Tabula Investment Management, added: “As Indian government bonds are added to global emerging market bond indices in the summer, inflows of over $35bn are expected over the next 18 months.”
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