UTI MF Set To Launch ETF

Mumbai, June 26: | Updated: Jun 27 2003, 05:30am hrs
Exchange traded funds (ETFs), which till recently failed to woo investors due to lack of liquidity, are likely to get a big boost. The countrys largest mutual fund, UTI-MF, all set to launch its ETF, Sunder, in the second week of July which will track the S&P CNX Nifty Index.

UTI MFs Sunder expects a corpus of about Rs 400 crore to begin with as against the combined corpus of Rs 27 crore of the two existing ETFs, and Rs 850 crore represented through 22 index funds launched by various MFs. In the last 10 years or so, equity schemes have garnered about Rs 400 crore.

A UTI official said: Amounts worth around Rs 394 crore from various players, like institutions, corporates and retail participants, have been indicated till date for Sunder.

Currently, the 22 index funds representing various MFs have a total corpus size of about Rs 832, out of which the two index funds of UTI have a corpus size of about Rs 500 crore - Rs 365 crore in UTI Master fund (representing Sensex) and Rs 135 crore in Nifty index fund.

Nifty Bees, launched by Benchmark AMC and which tracks NSEs Nifty, and Prudential ICICIs Spice that tracks the Sensex are the two existing ETFs. ETF schemes are popular in most developed countries. A lot of effort is being made to popularise Sunder through presentations and meetings. UTI MF is also in talks with its empanelled brokers, the UTI official added. About 179 brokers are empanelled with UTI MF.

Brokers help is sought basically for liquidity and once liquidity is created, the fund will grow on its own, the official said. The initial public offering (IPO) of Sunder is slated to open on July 7 and close on July 11. The minimum subscription size would be for 10,000 units, which is equal to five Nifty futures basket. The ETF scheme will get listed on July 14, 2003.

However, once the IPO period is over, the minimum tradeable lot for Sunder would be one share or one-tenth of the value of Nifty that is approximately around Rs 110.

Big size and liquidity will provide a lot of arbitrage opportunity for players between Sunder and Nifty futures.

The launch of ETF would be the second scheme from UTI MF since the mutual fund came into existence from February 1, 2003.

On June 23, UTI MF had launched its liquid scheme and raised over Rs 1,097 crore through IPO.

When UTI MF was carved out of the Unit Trust of India (UTI), UTI MF housed about 23 schemes with remaining assured return schemes going to UTI-I (the administrator of Specified Undertaking of Unit Trust of India). UTIs total asset under management is currently about Rs 16,000 crore.