IDFC Mutual Fund on Monday launched two target maturity index funds that will invest in constituents of CRISIL IBX 90:10 SDL plus Gilt Index (November 2026) and CRISIL IBX 90:10 SDL plus Gilt Index (April 2032).
Both schemes are open-ended. The new fund offer (NFO) for the fund maturing in November 2026 will open for subscription from Nov 14-16, 2022, while the NFO for the scheme maturing in April 2032 will remain open from Nov 14-28, 2022.
The fund house said investments could be made either through licensed mutual fund distributors, online platforms or directly on the IDFC website.
Highlighting why investors may consider these funds, IDFC AMC chief executive officer (CEO) Vishal Kapoor, in a press release, said, “On an absolute level, the 10-year and 5-year SDL yields have moved up in the last few months and stand at 7.94% and 7.74% as of 31st October 2022, providing a compelling opportunity for investors.”
Additionally, these debt instruments, he said, “provide the benefit of an implicit sovereign guarantee, thereby reducing any risk of default.”
Kapoor stressed that investors could benefit from the relatively higher yield opportunity with reasonable visible returns who remain invested till maturity.
IDFC CRISIL IBX 90:10 SDL Plus Gilt (November 2026) Index Fund could be ideal for investors with an investment horizon of 3-4 years, he added.
Index funds can provide investors access to quality debt investments at a relatively low cost for both short-term and long-term investors.
Highlighting the opportunities, fund manager Gautam Kaul added that the market expectation of further monetary policy tightening has led to a spike in yields.
He noted that the state development loan (SDL) strategy provides a relatively higher yield compared to government securities (G-Sec) and public sector undertaking (PSU) AAA bonds. Therefore, these index funds could provide an attractive investment opportunity, “given the upward yield shift in the 3-5 year and 10-year maturity bucket,” he added.
Other Key Features
• Both products come with a relatively high-interest rate risk and low credit risk.
• As a result, these index funds are suitable for investors seeking income after maturity.
• The lumpsum amount for subscription during the NFO is Rs 5000, and after that, in multiples of Re 1.
• For a systematic investment plan (SIP), the minimum amount is Rs 1000, and after that, in multiples of Rs 1.
• No exit load.
• The schemes aim to provide returns “corresponding to the total returns of the securities” as represented by the benchmark indexes before expenses, subject to tracking errors.
• However, there is no guarantee the investment objective will be achieved.
