Edelweiss Asset Management has emerged as the frontrunner to create, manage and launch the government's maiden debt exchange-traded fund (ETF), industry officials said Thursday.

Others in the race were SBI Funds Management, Reliance Nippon Life Asset Management, UTI Asset Management Company and Aditya Birla Sun Life AMC, they added.

All the five entities in race were invited by the Department of Investment and Public Asset Management (DIPAM) to make a presentation for the planned debt ETF Thursday, as per the information available on the department's website.

The selected AMC would work with the government and the advisors in all aspects of creating, launching and managing the proposed debt ETF, including all funds from operation (FFO), tranche and additional offering.

The debt ETF would comprise bonds, credit-linked note, debentures, promissory notes as underlying instruments issued by participating CPSEs/ PSBs/PSUs. The proposed debt ETF may also include government securities (G-Secs).

Finance Minister Arun Jaitley in 2018-19 budget had announced plans for a debt ETF, following the success of equity ETFs like CPSE ETF and Bharat-22 ETF.

To give effect to this, the DIPAM in November, had invited bids from mutual funds or asset management companies (AMCs) for the proposed debt ETF.

The debt ETF would help these state-run companies meet the capex and business needs by leveraging their aggregate strength. This will bring enhanced liquidity, investors base and transparency of the participating central public sector enterprises (CPSEs).

In India, the corporate bond market constitutes a relatively small size of around 13 per cent in terms of the GDP as compared to the government bond market, which is around 30.4 per cent in terms of the GDP. The debt market consists of the G-Sec market and the corporate debt market.

The G-Secs accounts for 79 per cent of the total amount of outstanding bonds in India.

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