Reliance Mutual Fund - “R*Shares Long Term Gilt ETF” (an open ended Index Linked Exchange Traded Fund) NFO Opens : 27-June-2016 NFO Closes : 01-July-2016 Offer for Sale of Units at Rs.10/- (On allotment, the value of each unit of the Scheme would be approximately equal to 1/100th of the value of Nifty 8-13 yr G Sec Index) per unit during the new fund offer period and Continuous offer for Units at NAV based prices
Fixed Income – Current Scenario India is in a sweet spot compared to rest of the world.. Long term Global India Short term Global India Interest rate Demographics Unfavorable Favorable Rising Falling Savings Falling Rising Growth Subdued Rising Growth Subdued Strong Reform momentum Muted Improving Productivity Falling Rising Financial stability Weak Strong Both from medium to long term India is in a rare sweet spot In the history of financial markets there will be very few markets which have had these kind of edges over the rest of the world 2
Nifty 8-13 yr G-Sec Index A route to Invest in Indian G-Sec market
About Nifty 8-13 yr G-Sec Index Launched in January 2011, Nifty 8-13 yr G-Sec Index is designed to provide the broad representation of the Government of India bonds having maturity of around 10 years. The index aims to capture the performance of the most liquid bonds with maturities between 8-13 years. Nifty 8-13 yr G-Sec is constructed using the prices of top 5 (in terms of traded value) liquid Government of India bonds with residual maturity between 8 to 13 years and have outstanding issuance exceeding Rs. 5000 crores. The individual bonds are assigned weights considering the traded value and outstanding issuance in the ratio of 40:60 Nifty 8-13 yr G-Sec Index represents the most active tenor of the Indian G-Sec market. Source : IISL
Nifty 8-13 yr G-Sec – Index Methodology Index represents Government of India Bonds having residual maturity between 8-13 years. Top 5 liquid bonds based on turnover during the month shall be eligible to be part of the index with outstanding amount of the bond be more than Rs.5,000 crores Each bond is assigned weight based on liquidity and outstanding amount, liquidity of the bond has a weight of 40% and outstanding amount has weight of 60%. Weights of the bond are determined at beginning of the month and remain constant during the entire month and Index is reviewed on a monthly basis the index values will be live during the markets trading hours and closing price published at end of the day The index is computed using the total returns methodology and FIMMDA prices are used for valuation of the bonds in the index. Accrued interest is calculated using 30/360 day count convention Source : IISL
Nifty 8-13 yr G-Sec – Index Movement 1600 1500 1400 1300 1200 1100 1000 900 03-Apr-11 03-Apr-12 03-Apr-13 03-Apr-14 03-Apr-15 03-Apr-16 03-Jul-11 03-Oct-11 03-Jul-12 03-Oct-12 03-Jul-13 03-Oct-13 03-Jul-14 03-Oct-14 03-Jul-15 03-Oct-15 03-Jan-11 03-Jan-12 03-Jan-13 03-Jan-14 03-Jan-15 03-Jan-16 Nifty 8-13 Yr Benchmark G-Sec Index Values Source : IISL Past Performance may or may not be sustained in future and the same may not necessarily provide the basis for comparison with other investment.
Nifty 8-13 yr G-Sec Index – Calendar Year Returns Calander Years Returns Average Maturity (In Yrs) 2011 4.64% 10.22 2012 11.17% 10.28 2013 -0.62% 10.35 2014 16.57% 10.7 2015 7.73% 10.53 YTD Returns as on 31 st May 2015 is 4.17% on absolute basis Source : IISL Past Performance may or may not be sustained in future and the same may not necessarily provide the basis for comparison with other investment.
Constituents of Nifty 8-13 yr G- Sec Index Sl No. Security ISIN Maturity Weights (%) 1 7.59% G.S. 2026 IN0020150093 11/01/2026 25.28 2 7.72% G.S. 2025 IN0020150036 25/05/2025 22.79 3 7.59% G.S. 2029 IN0020150069 20/03/2029 19.37 4 8.4% G.S. 2024 IN0020140045 28/07/2024 17.11 5 8.15% G.S. 2026 IN0020140060 24/11/2026 15.44 Source : IISL as on 31-May-2016
Why Invest In Exchange Traded Fund (ETF)?
About Exchange Traded Funds (ETFs) Bought and sold on a Can be traded like a Basket of asset instead stock exchange stock of a single stock ETFs are Mutual Fund schemes and listed & traded on the exchange like stocks An ETF represents a basket of stocks that reflect an index An ETF helps you to achieve portfolio diversification, risk management & cash equitization at a relatively low cost 10
ETFs – Concepts Structured like Mutual Funds, but listed & traded on the exchange like stocks ETF UNIT An ETF represents a basket of stocks that reflect an index An ETF helps you to achieve portfolio diversification, risk mitigation, cash equitization & relatively low cost Ease of transaction - Can be easily bought / sold like any other stock on the exchange subject to availability of buyer and seller through terminals spread across the country Ease of Liquidity - Can be bought / sold anytime during market hours at prices that are expected to be close to actual NAV of the ETF Fund Scheme. Thus, investor transacts at real-time prices instead of end- of-day prices subject to availability of buyer and seller Other Special Features Instant diversification through exposure to a large number of stocks by purchasing as low as 1 unit Efficient tool to execute strategies like arbitraging between Basket of cash & futures market Stocks Ability to put limit orders
ETFs – an effective tool for one’s portfolio Low Cost Long Index Exposure – Derivatives have a high roll-over cost and also known for short term gains, ETFs hence makes a cost efficient option for maintaining long index positions. Cash Equitization – Investors who maintain cash positions, awaiting suitable investment options, can use ETFs to gain instant exposure to equity markets as per their asset allocation, helping them access and not miss out on any market movements Core / Satellite Investment Strategies - ETFs allow investors to maintain broad- based / fundamental index ETF as their core and actively move satellite investment exposure to momentum or sector ETFs as per the market movements Sector Rotation / Tactical Allocation – ETFs can be used to add or be overweight specific markets, sectors or industries to a core portfolio Portfolio Completion - ETFs allow investors to fill gaps in a portfolio in specific asset classes or sectors Use of ETFs by Arbitrator* - Low cost ETFs assist in arbitrages as buying ETF is fairly convenient compared to buying the entire set of stocks in the index basket *Subject to the market condition and availability of spread and liquidity.
Working Mechanism ETFs – During NFO Primary Market Investors – Directly Investment Amount Allotment of Units During NFO Securities R&T NDS - OM Reliance Mutual Fund Cash ETF units Securities Custodian During NFO Investors can directly approach AMC 13
Working Mechanism ETFs – Post NFO Secondary Primary Market Market Seller Cash ETF units Authorized Buy / Sell Participants / Stock Exchange Financial Institutions Market making / arbitrage Subscription / Cash ETF units redemption in-kind Fund Buyer 14
Investment in G-Sec via different Modes ETF Stocks Exposure in G Sec Index Buying a Single unit Need to buy 5 Securities Rebalancing Easy Difficult 5 different securities in Only a single unit needs to Transaction Procedure different weightage needs to be purchased be purchased Single Unit Price depending The cost of buying 5 on the unit size For eg If one securities at their market unit is 1/10 of the Index, Minimum Investment price.(Very High Cost as 1405/100= 14.05 one needs compare to ETF & to spend only 14.05 Rs to Derivatives) buy one unit Above table only shows investment in Nifty 8-13 yr G-Sec through different modes. Investors may makes investment in Gsec via other modes also. Investors are advised to consult their financial advisor before making any investment
R*Shares Long Term Gilt ETF (An open-ended, Index Exchange Traded Fund)
Positioning – R*Shares Gilt ETF Investment in R*Shares Gilt ETF is a route to G-Sec investing in India ETI It allows investors to take part in India growth story by essentially investing in 5 most liquid bonds in the G-Sec space with maturities between 8-13 years . The index is designed to serve as both a benchmark and an investable index and is comprised of securities providing representation of the Government of India bonds having maturity of around 10 years. Investments in R*Shares Gilt ETF can form part of “core debt portfolio” , especially for Institutional investors By investing in R*Shares Gilt ETF, strategies like “cash equitization” can be effectively deployed because of its inherent advantages like one of the best market representation.
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