Government opens bids to manage mother of all funds

Sebi-registered MFs with at least Rs 2,500 cr AUM will be eligible to manage PSU ETF

The central government has entered the last lap in the process of launching the Central Public Sector Enterprises Exchange Traded Fund (ETF). The fund, which some estimates say could be as big as Rs 30,000 crore, is part of the government’s plan to encash parts of its shareholding in some 50 public sector enterprises in a time-bound manner. The department of disinvestment (DoD) has initiated the search for appointing a fund manager for this mega fund.

In a request for proposals floated on Friday, DoD called for “Sebi-registered mutual funds / asset management companies” with at least five years experience of fund management, and average equity / ETF assets under management “of not less than Rs 2,500 crore in India.”

ICICI Securities is advising the government on the entire process.

The DoD wants the fund manager selected to provide “inputs on the various options suggested for structuring the CPSE basket, including but not limited to the terms of composition of stocks, weightages and methodology followed, etc.”
 

TIMELINE FOR ETF RACE 

• Jan 8: Last date to seek entry into pre-bid meeting
• Jan 11: Pre-bid meeting to clear any doubts on process 
• Jan 24: Last date for submission of bids
• Jan 28: Schedule for presentations to be finalised
• Jan 29: Presentation by bidders

Source: Department of disinvestment

The fund manager will also be responsible for various compliance and regulatory requirements that precede the launch of the new fund offer of the ETF. The government also wants the manager to leave no stone unturned in marketing the scheme to investors. “The selected AMC / ETF provider shall incur marketing / advertising expenses to the extent of at least Rs 15 crore under NFO expenses, for the CPSE ETF. The AMC / ETF provider may incur marketing expenses under NFO expenses, over and above this stipulated amount. The key expenditure heads and the item-wise amounts to be spent under this head shall be finalised and approved by the government, in consultation with the AMC and the advisor.”

The winning bidder is likely to be determined based on a combination of technical and financial parameters. In the financial parameter, funds are asked to specify the percentage of weekly assets they will charge as expense ratio. While this ratio will be applicable up to assets of Rs 5,000 crore, for the next Rs 10,000 crore AMCs will be able to charge 80 per cent of this ratio. For assets over Rs 15,000 crore, the fund can charge 60 per cent of the expense ratio bid for, the bid documents said.