iShares to Launch India ETN Tied to Domestically Listed Indian Stocks

The beauty of Barclays Bank’s exchange-traded note [ETN] product structure is that it can be applied to … anything. Because the notes are debt instruments backed by Barclays, and not equity instruments that hold actual securities, they can be applied to any asset, so long as Barclays is willing to take on the risk.

So far, Barclays has focused the notes on the commodities space, with the launch of three commodity-based ETNs. But things will get much more interesting on December 20, when the company launches its fourth ETN, the iPath MSCI India Index ETN, tied to domestically listed India stocks. The fund will list on the New York Stock Exchange, and trade under the ticker symbol “INP.”

The underlying MSCI index tracks 68 of the largest companies in the domestic Indian market, representing over 85 percent of the total market cap of the country's borse. Indian markets have been hands-off for U.S. investors, thanks to restrictions on foreign ownership; currently, there are only two U.S. mutual funds focused on the country, and both are extremely expensive: the Eaton Vance Greater India Fund hits investors with a 2.15-2.65 percent annual expense ratio, while the Matthews India Fund tallies up at an even 2 percent. By contrast, the new ETN will charge just 75 basis points.

Claymore Securities has also filed for an India exchange-traded fund, but rather than holding domestically-listed India assets, it will focus on American Depository Receipts.

Comments

[QVM Group:]

Interesting and welcome development generally. What is the credit risk for investors relying on Barclays? How can we measure when and if they have taken on too much risk? Do you know how they intend to manage the risk -- can they buy in India or will they do something else?

2006 Dec 12 10:17 PM

[Internet2k4:]

Sounds like it will run close to CEFs IIF and IFN, but at a lower MER. IFN's semi-annual repurchase offer in September turned out be a great deal, and potential investors should factor it.

2006 Dec 13 03:58 PM

[David Jackson:]

What's an MER?

2006 Dec 13 05:22 PM

[QVM Group:]

Management Expense Ratio, I think he means

2006 Dec 13 06:27 PM