JPMAM partners up to offer Indian investors access to its ETF

India’s Bandhan Mutual Fund has launched the country’s first US debt fund of funds, leveraging one of JPMorgan Asset Management’s exchange traded funds as an underlying strategy.

The Bandhan US Treasury Bond 0-1 Year Fund of Fund is an open-ended FOF scheme investing in the $2.33bn JPMorgan BetaBuilders US Treasury Bond 0-1 year Ucits ETF, a strategy that tracks the performance of US dollar-denominated fixed rate government bonds issued by the US Treasury with a maturity of less than one year.

Benchmarked against the ICE 0-1 Year US Treasury Securities Index, the Bandhan US Treasury Bond 0-1 Year FOF offering kicked off on March 10 and will close on March 23.

In 2021, US asset manager Vanguard similarly partnered with Navi Mutual Fund, the fund unit acquired by Sachin Bansal, co-founder of Indian online retailer Flipkart, to roll out a FOF scheme.

This article was previously published by Ignites Asia, a title owned by the FT Group.

The latest venture marks JPMAM’s first such partnership on a FOF in the Indian ETF market, although it already has several existing equities strategies available to Indian investors via local feeders.

JPMAM pulled out of India’s onshore market almost seven years ago after it agreed in 2016 to sell its $1.31bn India mutual fund business to Mumbai-based Edelweiss Asset Management, a subsidiary of Edelweiss Financial Services.

It made the decision after a global strategic review to “refocus on other priorities globally”, the company said at the time.

The US firm only launched its own ETF business in 2014, rolling out dozens of strategies in the US and Europe before gradually building out capabilities in the Asia-Pacific region.

In 2019, Sean Cunningham, JPMAM’s head of Asia ETFs, told Ignites Asia that the group was trying to “figure out where the product gaps in Asia are and what is needed to plug those gaps”.

It launched its first locally listed ETFs in the Apac region in November 2022 with two actively managed ETFs in Australia. The group also previously expressed ambitions to launch locally listed ETFs in China via its now wholly owned mutual fund business.

Vishal Kapoor, chief executive of Bandhan MF, said the Bandhan US Treasury Bond 0-1 Year FOF would allow domestic investors to invest without being exposed to any equities market-linked volatility.

“Currently, mutual funds offer global diversification via equity-oriented funds, but this fund is another step in offering opportunities via debt-oriented funds,” he details.

Kapoor also touted the strategy’s attractiveness following the narrowing of the spread between US and India one-year government bond yields from 390 basis points to 227 bps as of February.

Additionally, since US Treasury bonds were now maturing within one year at about 5 per cent, up from less than 1 per cent a year ago, zero to one year could be the “sweet spot” as they offered higher yields compared with longer-term securities, Bandhan MF said in a statement.

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“This relatively higher US dollar return can be further complemented by any weakening in the Indian currency versus the US dollar, as has been witnessed in nine out of the past 10 calendar years,” it added.

The Bandhan US Treasury Bond 0-1 Year Fund of Fund is the first offering from Bandhan Mutual Fund after it rebranded from IDFC Mutual Fund earlier this month.

Bandhan Mutual Fund is one of India’s top fund houses with more than $14bn in assets under management as of February 2023.

The launch of Bandhan MF’s new ETF comes as India’s mutual fund industry is shifting gradually towards more passive investing, with local regulators relaxing guidelines for firms looking to offer such vehicles, according to Cerulli Associates.