Zyfin has launched an industry first ETF to the European market.
Review
ZyFin has teamed up with First Trust Global Partners to launch Europe’s first physically replicated Indian ETF.
The LAM Zyfin MSCI India Ucits ETF is available on the London Stock Exchange and offers investors the opportunity to track the performance of the MSCI India 10/40 Index, which is denominated in US dollars.
A physical replication strategy will be used to track the possible returns of the index after fees and charges.
With a total of 74 constituents, the MSCI India 10/40 Index measures the performance of the large and mid-cap segments of the Indian equity market.
Approximately 85 per cent of India’s free float-adjusted market capitalisation is covered reflecting what Zyfin’s says is the ‘market’s economic diversity.’
The ETF is rebalanced quarterly to update any changes in this market capitalisation or sector re-classifications.
Due to Ucits regulations, no more than 5 per cent can be invested in a single issuer’s securities. However, this can be increased to 10 per cent as long as exposure to these larger assets does not exceed 40 per cent of the fund’s total assets.
Investors will be able to trade in US dollars, euros and sterling, with the total expense ratio set at 0.89 per cent pa.
Comment
India is an area that many experts believe represents a great opportunity for investment.
In January of this year, the International Monetary Fund (IMF), predicted that the country will grow more than any other global economy during 2016 and 2017.
So it is perhaps a surprise that this is the first Indian ETF of its kind to be made available on this continent.
Many investors continue to be wary of emerging markets and their inherent volatile nature. China is a case in point, with growth expected to slow down over the next couple of years, but India is the only country expected to grow by more.
There is always a debate around the value of ETFs and active versus passive funds in general, but there is no reason why both cannot sit in an investment portfolio, especially considering diversification is important for any investment strategy.
If investors are confident about India’s prospects then the index tracking approach does not present a problem, but some may feel an active fund manager could uncover the real growth opportunities.
A single-country portfolio is also riskier than a more generic emerging markets product. But India’s lure may provide a strong pull for some.
craig.rickman@ft.com
