The Securities and Exchange Commission of Pakistan (SECP) has issued Circular No.20 of 2021 to define the framework for issuance of Debt and Hybrid Exchange Traded Funds (ETFs) which would not only help diversify the range of ETFs available to the investors, but will also help create a competitive and conducive playing field.
As per the press release, the circular also updates the existing framework for Equity ETFs. While the debt ETFs are also being passively maintained, managed and traded on a regular exchange.
Where Debt ETFs facilitates ordinary investors to secure corporate bonds or Treasuries in an inexpensive way, the Hybrid ETFs provides investment in an index with both the debt and the equity securities.
For investors with a conservative risk profile Debt ETF Investment is better suited, as it adds a strong defence to their investment portfolio.
ETFs are investment mechanism through which investors are covered in specific areas of stocks, commodities, bonds, futures and other classes of asset. They are provide investors with the benefit of flexibility in trading, diversification of investor’s portfolio and transparency of underlying holdings.