Analyzing Why Investors are Choosing ETFs Over Hedge Funds

Meet Mihir Kapadia, the creator of the world’s first India fixed income ETF that’s listed on the London Stock Exchange: Sun Global Zyfin SOE Bond UCITS ETF (CRRY).

As the founder and CEO of Sun Global Investment, Kapadia said investors are increasingly choosing ETFs over hedge funds as their vehicle of choice.

“ETFs already outstrip hedge funds by about $3.4 trillion, or by over 10 percent,” Kapadia said. “The ETF industry has attracted assets from the hedge fund sector as hedge funds find it harder to justify their higher fees and inconsistent performance numbers verses a passive ETF investment which can offer diversified exposure at a fraction of the cost of a hedge fund. Add to this the instant liquidity or exchange traded component of an ETF and the ETF offers certain investors a more predictable investment return with lower volatility”.

Previously, Kapadia said hedge funds were the go to solution for investors looking for uncorrelated or entry points too hard to access asset classes such as Indian onshore fixed income.

“Now with ETFs such as the Sun Global Zyfin Indian Fixed Income SOE UCITS ETF, asset managers can access the asset class via a UCITS approved structure with exchange traded liquidity and lower fees,” he said. “Throw into the mix physical backing as well and the investment case for such ETFs can be compelling.”

Kapadia launched London’s first India Sovereign Enterprise Bond dubbed a “curry bond” which offers British and international investors exposure to a basket of Indian public sector corporate bonds, including the Indian Railways and Indian Rural Electrification Corporation.