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.
In the ending days of October, Sun Global Investments and India’s Edelweiss Group entered a partnership agreement to offer full service solutions in both primary and secondary INR fixed income markets as well as USD denominated Indian debt across UK, Europe and Asia – raising Rs. 502 crore by selling masala or rupee-denominated bonds to overseas investors in its debut issuance of such securities.
Even more recently, Kapadia’s Indian fixed income ETF passed its first major benchmark of $10 millionUSD.
“ETFs have started overtaking hedge funds and investors are knowingly turning to ETFs with current markets being so turbulent, it is no surprise that the ‘CRRY’ bond is performing so well,” he said. “Reaching $10 million is a huge benchmark for the ETF, it means Sun Global/Zyfin have created and launched access to a previously unobtainable asset class.”
He added ETFs are open ended funds and as such their ultimate size is dependent on real investor demand.
“Our Indian Fixed Income ETF physically holds the underlying Indian SOE bonds it means the only constraint on the ETF is the available SOE bonds the ETF holds,” he said. “Given the constraints of the central banks in the western world on their ability to increase interest rates by any meaningful way, there is now a growing consensus among smart investors that Indian rupee will continue to offer the best carry trade and the Sun Global Zyfin SOE Bond UCITS ETF is best able to deliver on that strategy.”