exchange-traded-fund

Why is it in the news ?

The Further Fund Offer 2 (FFO 2) of Bharat 22 ExchangeTraded Fund (ETF), is due to open for subscription for anchor investors cum non-anchor investors.

What are Anchor investors?

  1. This concept was introduced by SEBI in 2009.
  2. It defines Anchor investors as the institutional investors who are offered shares in an IPO a day before the offer opens.
  3.  As the name suggests, they are supposed to ‘anchor’ the issue by agreeing to subscribe to shares at a fixed price so that other investors may know that there is demand for the shares offered.
  4. Each anchor investor has to put a minimum of ₹10 crore in the issue.

 

What is the Bharat 22 ETF ?

It is a basket of bonds issued by Central Public Sector Undertakings (CPSUs), Central Public Sector Enterprises (CPSEs), Central Public Financial Institutions (CPFIs) and other government organizations.

Exchange Traded Funds

  1. Conceptually, it can be defined as a collection of Securities/Bonds may be traded on the stock exchange.
  2. The trading value of an ETF depends on the Net Asset Value (NAV) of the underlying stocks/Bonds in the basket.
  3. They are traded throughout the day like Stocks, and distinctively from Mutual funds which are traded once a day after market close.
  4. The number of underlying stocks in an ETF may vary from hundreds to thousands across various industries or even restricted to any particular Industry.
  5. Though the ETF does not give a very high return but it gives the opportunity of safe investment which equity does not provide.

Further fund offer (FFO)

  1. A further fund offer (FFO) is a subsequent offering in a mutual fund, typically an exchange-traded fund (ETF), from the issuer.
  2. FFOs in India have usually been a feature of government ETFs such as CPSE ETF and Bharat 22 ETF.

FFO vs FPO (Further public offer/Follow on Offer)

  1. FFO applies to mutual funds while FPO applies to stocks.
  2. An FFO is the issue of a tranche of units in a mutual fund after its launch while in an FPO, an already listed company issues shares to the public afresh.