Home / Money / Personal Finance /  Why cannabis, metaverse are sure bets for Mirae's Global X ETFs

Exchange traded funds (ETFs) in India have seen a sharp growth in the last few years. With current assets at 4.5 trillion, there has been a three-fold jump in investor assets held in ETFs in India over the last three years. Following Sebi’s strict scheme re-categorisation norms, several of the new fund launches have been in the ETFs space. Luis Berruga, chief executive officer, Global X ETFs, which is owned by Mirae Asset Financial Group and has around $70 billion of assets under management, spoke to Mint on the global trends in the ETF space and what the future of ETFs in India could look like. Edited excerpts:

How do you go about identifying the investment theme for your products?

The first thing is our conviction on the theme’s potential for becoming a very relevant part of the economy over the next two-three decades. We look at the target addressable market, long-term growth prospects and also the regulatory framework. We also want there to be at least 25 companies within the theme for diversification. To ensure there is liquidity in underlying securities, we only look for companies that have a market cap of $100 million or higher. We also look for average daily volumes of the company’s share on the exchanges.

 

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Cannabis, metaverse, blockchain, bitcoins are among your new offerings in the thematic ETF space. How do you see them playing out?

We think some of the perceptions around cannabis have changed, especially in the US. It is also more socially accepted than what it was like 20 years ago. We are already seeing trend of legalization of cannabis use in several states in the US. Not just for recreational purposes, but also for medical uses. We have a high degree of conviction that digital assets will grow at a rapid pace over the next 5-10 years. So, we were among the first few companies to launch blockchain and bitcoin ETF in the US. We are quite bullish on metaverse. It sits at the intersection of three powerful things—social media, gaming and virtual reality. Data shows that about 79% of active users make a purchase in the metaverse. So, that is a significant conversion rate. The metaverse ETF was launched in April this year.

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India could get included in global bond indices. If that happens, will you look at venturing into fixed income space, with focus on India?

We already have a Global X Emerging Markets Bond ETF. So, if India gets included in global bond indices, it will automatically become part of that strategy. What we have seen over the years, particularly in the US, when investors think of emerging markets, they allocate to emerging markets as a region and not a country. So, we will have to look at demand for such strategies.

What are your plans for the Indian market?

We see the opportunities to bring some of the strategies that we have developed in the US to the Indian market. Mirae Asset (India) has launched an electric vehicle (EV) fund, which will be investing in our suite of EV-focused ETFs.It has also launched an artificial intelligence fund, which is also using one of our ETFs. Our global presence gives us flexibility to bring new strategies.

Any plans to launch ETFs focusing on Indian companies?

We don’t have any concrete plans right now. But we would like to explore the opportunity to work closely with the team at Mirae Asset (India). One approach could be to bring an actively-managed ETF in the US market, leveraging on the strong investment and research capability of Mirae Asset (India).

There could also be an opportunity to do an India innovation ETF, where the focus is on companies younger in their development cycle, offering innovative products and services to the Indian market. The Indian landscape seems to be fascinating with the large amount of venture capital activity and the startup ecosystem that it has created. But we would like to discuss this with the team here in India.

You have several ETFs tracking emerging markets, but not India. Any reason for this?

We have multiple ETFs that offer exposure to the Indian market. We didn’t launch an India ETF because there are already multiple ETFs in the US market, offering India-focused ETFs. Over the years, we have found that the first-mover advantage in single-country ETFs is extremely important. So, if you are first to do a country ETF, you have a very strong competitive advantage over others, as you have the assets and the liquidity. We are obviously impressed by India and we see long-term growth prospects for the Indian economy. But it is difficult to compete in the US market, if you are the fourth or fifth entrant in a single-country ETF.

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