Bharat Bond ETFs - This is about Dreams

Demystifying Black Swan – events & ideas

Dear Investors,

Incidentally, last year - same time, I started making frequent trips to Delhi and as most of you may know, January isn't the most pleasant time in the year to be flying to & fro Delhi. It was then, in January 2019, that Edelweiss AMC emerged as the winner of a mandate to launch a Bond ETF in association with Government of India. We were unconventional winners by a long distance, as media murmurs were ripe – a young private sector fund house, who's nascent to fixed income business, and as expected the NEWS took a fair number of people by surprise. There were many skeptics – debt ETF in a country where bond markets are not liquid, low cost product, and many more. The most common question was if it will take off, and how?

We decided to take the bull by the horns and took frequent trips to Delhi in 2019 – 50 trips, as I last counted. Giving a vision and a new product life often takes much more than you estimate. We engaged in a long process with various stakeholders including public sector borrowers, index providers, and DIPAM (Ministry of Finance) to understand what possible product structures can be created, and what made sense in the context of India's regulatory environment. We tried understanding global best practices in debt ETFs from players like Blackrock, only to realize that Indian investors have their own unique product needs. Finally, after six months of continuous endeavor, a well-tested, thoughtful, and final product emerged. Launching India's first corporate bond ETF, as we learnt to engage with many ministries and regulators to create a regulatory ecosystem for the product to succeed. The process included many nuances as we imagined, sometimes not easy, but extremely enriching – because we learnt that getting something new off the ground really requires synergy from lot of things, and people to come together.

Bharat Bond's cabinet approval, the media buzz, and the NFO's astounding success has delighted us all, perhaps in ways we didn't imagine in January 2019. In its debut, it also accomplished many firsts – the cheapest MF in India, the lowest cost debt fund in the world, and the largest debt NFO in India, at Rs 12,000 crores, 1.8 times the base issue, with more than 55,000 retail investors participating. More than that, the joy in creating history, that all of us experienced on January 2, 2020 at the listing ceremony of India's first corporate bond ETF – is something words just cannot describe.

But this article isn't about Bharat Bond, the product, or even Bond ETFs.

This is about dreams!

The second thing I learned through Bharat Bond, and it is particularly topical as we enter a new year, is that change is important. Challenging the status quo, doing something for the first time, doing something bold is never easy, but it is almost essential to survive.  This is so important in a country like India, which is rapidly evolving, and a business like asset management, where trends change promptly. An interesting video showed that it took 13 years for the city of New York to go from horses to cars – which worked last decade, may be obsolete this decade. Change will attract skeptics who will say it can't be done, and change will attract critics who will say it won't work, but change is worth it. Will Bharat Bond usher in an era of lower cost fixed income passives in India – who knows, it just might.  Could it eventually drive more retail investors to make MF their first debt investment rather than a FD, potentially?

And finally, Bharat Bond reminds me of the most basic fact of business – in companies or projects, there is no substitute to hard work and execution.   Through a tough market environment, a tough battle at home, or a transformational project, good old persistence is very powerful in getting you through.  Good execution – tying up loose ends, making sure the details are taken care of, the plans are made well in advance – also cannot be underestimated. One of the reasons we were able to pull off a NFO within 8 days of Cabinet approval, is due to the power of planning over 6 months. Plan well, work hard, and things eventually fall in place.

We live in a world where there're lot of things to be gloomy about, but at Edelweiss AMC, we continue to be driven by growth. I remember joining Edelweiss in 2014, and in December 2014, total assets stood around 600 crore. 5 years later, they are at Rs 24,000 crore, and this is just a beginning. Time is powerful; in life and investing – and we can achieve much more than spreadsheets, forecasts more than our minds can imagine. Welcome to a new year and a new decade, where we'll have the power to imagine, the courage to challenge, and the patience to persist.

Cheers – to 2020, to growth, and to dreams!

Regards,
Radhika