India's Kotak launches ETF linked to BSE index

MUMBAI, May 7 (Reuters) - Kotak Mahindra Asset Management launched on Wednesday an exchange traded fund (ETF) tracking India's benchmark index and said it plans to list the fund on the Bombay Stock Exchange by the end of May.

Kotak Sensex ETF will be open for subscription till May 16 and joins India's 13 exchange traded funds that managed assets worth about 35.5 billion rupees ($860 million) at the end of March, data from fund tracking firm ICRA Online showed.

ETFs are listed on stock exchanges and offer investors exposure in underlying shares or other assets. They tend to be more liquid than traditional funds and charge lower management fees due to their passive index-tracking model.

"Increasingly, it is becoming difficult for actively managed funds to beat the index," Chief Executive Sandesh Kirkire said. "You will see a lot of indexing activity going forward."

The average returns from diversified equity funds were lower than the benchmark index in one, two and three-year periods ended March 31, the fund house, a unit of Kotak Mahindra Bank , said in a presentation.

Each unit of Kotak Sensex ETF will be equal to one hundredth of the value of the 30-share BSE index, which closed down 0.19 percent at 17,339.31 points on Wednesday.

Finance, oil and gas and information technology stocks had 52.2 percent weightage in the index at the end of March, Kotak said.

In the United States, the world's largest fund industry, assets under management were about $571 billion across 644 ETFs, data from Investment Company Institute showed. ($1 = 41.3 rupees) (Reporting by Nishant Kumar; Editing by Ranjit Gangadharan)

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