Insurance majors anchor CPSE exchange-traded fund

KR Srivats New Delhi | Updated on March 12, 2018

FIIs stay away, may join the party later; retail interest robust

Insurance majors weighed in with big investments as the CPSE Exchange Traded Fund opened on Tuesday for anchor investors.

Even as foreign institutional investors stayed away, as many as six of the seven institutional investors that put in aggregate bids of ₹835 crore for the anchor investor portion were domestic insurers. The CPSE ETFs for the anchor portion was open for a day on Tuesday.

IRDA opens doors

The insurance biggies were taking full advantage of the recent IRDA decision to allow insurers to invest in ETFs.

Till the Insurance Regulatory and Development Authority in early March opened the doors to insurers to invest in ETFs, with some riders, insurers could invest only in passively managed schemes of mutual funds registered with SEBI. Also, the ETFs had to be listed and the overall expense ratio had to be under 0.50 per cent.

Most state-owned insurance majors — Life Insurance Corporation, General Insurance Corporation, National Insurance Company, The New India Assurance and United India Insurance — participated in a big way in the CPSE ETF’s anchor investor portion.

“We think investing in the CPSE exchange-traded fund is a good proposition for us in the medium to long term. We have long-term funds and our regulator recently allowed us to park funds in ETFs,” G Srinivasan, Chairman & Managing Director, New India Assurance, told Business Line.

While Bharti Axa Life Insurance was the sole private insurance player to bid for CPSE ETF, State Bank of India was the only bank to participate.

A qualified institutional buyer, making an application in the anchor investor portion, will have to make a minimum application amount of ₹10 crore. Anchor investors had to bring in a margin of at least 25 per cent of the subscription amount during the anchor investor NFO period, which in this case was on March 18 (Tuesday).

Why did FIIs keep away?

One reason why FIIs kept away from the anchor investor portion was the 30-day lock-in rule, sources said. This lock-in applies to units allotted to anchor investors during the new fund offer (NFO) period.

But official sources would not rule out the possibility of foreign investors coming on board on the last day of the issue (Friday) under the non-anchor portion

Good retail appetite

Retail investors seemed to have taken a fancy for CPSE ETFs going by the response for the non-anchor portion on the first day.

Demands for CPSE ETFs worth nearly ₹1,000 crore came from the retail category (under the non-anchor portion), sources said.

Published on March 19, 2014

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