Stock market launches first debt-based fund

Exchange-traded fund consists of govt securities that will offer fixed return

Our Correspondent September 11, 2022


Pakistan Stock Exchange (PSX) has announced the launch of its first debt-based exchange-traded fund (ETF) that will offer a fixed rate of return to investors.

“This ETF…is the first of its kind as it consists of a blend of government debt securities as the underlying asset class,” said the PSX in a statement. Trading in the newly launched ETF will kick off on Monday. ETF is a basket of different securities. Its units are traded like stocks at bourses around the globe. ETFs are mostly designed to attract retail investors, who have a low amount to invest, but want to buy a number of securities with the limited amount.

HBL Total Treasury Exchange Traded Fund carries a diversified pool of fixed income government debt securities. Underlying assets in the ETF consist of cash and cash equivalent treasury bills (T-bills) and Pakistan Investment Bonds (PIBs).

This is the seventh ETF in a row at the PSX. All the six previously introduced ETFs comprise equity stocks instead of debt stocks.

“Investing in government securities (by retail investors) is now as easy as investing in shares on the PSX,” the PSX statement quoted bourse Managing Director and CEO Farrukh H Khan as saying on the launch of the new ETF.

“This is the right time to launch this ETF as returns on fixed income securities are high,” he added.

Earlier, it was a distant dream for retail traders to invest in government debt securities, including T-bills and PIBs.

Introduction of the fixed-income ETF is part of the PSX and mutual fund industry’s efforts to provide a wide range of low-cost ETFs for investors, allowing them to easily take exposure to different asset classes and investment strategies.

“The purpose of introducing new products is to increase savings by the people in Pakistan and generate volumes at the PSX,” the statement added.

Published in The Express Tribune, September 11th, 2022.

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