New US ETF issuer NextFins has launched its debut ETF which provides exposure to financial services companies based in India.
The fund provides exposure to the 20 largest financial services companies listed in India.
The Nifty India Financials ETF (INDF US) has been listed on NYSE Arca and has come to market in partnership with white-label ETF platform Exchange Traded Concepts.
The fund has an expense ratio of 0.75%.
NextFins was founded earlier this year by Manny Singh, previously co-Founder and CIO of Kavi Asset Management, a NY-based hedge fund; Amit Anand, co-Founder of Adi Capital Management, a global long-short equities fund, and Nicholas Thadaney, formerly President and CEO, Global Equity Markets at TMX Group.
The trio says they were drawn to launching India-focused ETFs due to the country’s robust economic growth potential which is expected to be driven by favourable demographics, ongoing urbanization, and growing access to the digital economy.
With India currently exhibiting a low base of credit penetration, NextFins believes that financial services companies are poised to be a key component of realizing this potential growth.
A statement from NextFins reads: “INDF allows investors to access the financial companies that directly participate in the megatrends driving Indian economic growth: a young population, a growing workforce, urbanization, increasing access to the digital economy through smartphones, and rising personal credit penetration.”
NextFins believes that their debut ETF can play an important role in investors’ portfolios as broad emerging market ETFs, such as those based on the MSCI Emerging Markets Index, tends to underweight India relative to its growth potential. India currently accounts for a weight of 8.3% in MSCI’s flagship EM index while China holds a weight of 42.0%.
Furthermore, NextFins notes that the ETF primarily targets private-sector financial services companies and tends to avoid companies that are still majority-owned by their founding families. According to NextFins, this raises the corporate governance profile of the underlying constituents, paving the way for sustained growth.
Methodology
The Nifty India Financials ETF tracks the Nifty Financial Services 25/50 Index which reflects the performance of a diverse group of Indian financial services firms including banks, housing finance companies, and insurance companies, among others.
The index selects the largest 20 stocks listed on India’s National Stock Exchange (NSE) that index provider Nifty Indices has categorized as belonging to the finance sector.
Constituents are weighted by float-adjusted market capitalization subject to a 25% cap on the largest stock and a further cap of 50% on the sum of all stocks with weights above 5%. The index is reconstituted on a semi-annual basis and rebalanced quarterly.
As of the end of September, nearly half of the index’s exposure was accounted for by just three companies – HDFC Bank (18.5%), Housing Development Finance Corporation (15.3%), and ICICI Bank (12.0%). The next largest constituent was ICICI Lombard General Insurance (4.6%).
The index is currently yielding 1.2%.