The Union Asset Management Company (AMC) today opened the registration of its new fund offer (NFO) for its newly-launched Union Gilt Fund. It is an open-ended debt scheme.
Put simply, a typical gilt fund is a type of debt fund which largely invests in government securities. The term ‘gilt’ comes from government-issued gilded-edged certificates.
Interestingly, according to the Securities and Exchange Board of India (Sebi), gilt funds are mandated to invest a minimum of 80 per cent of its assets in government securities. Union AMC has also reiterated this in its press release pertaining to the gilt fund.
According to the press release, the NFO of the Union Gilt Fund will close on August 1. Thereafter, the allotment of funds will take place on August 8, 2022. Post allotment, the Union Gilt Fund scheme will re-open on August 17, 2022, for the purpose of ongoing sale and repurchase.
To participate in this scheme, buyers will need to invest a minimum of Rs. 1,000 and thereafter, in multiples of Re.1.
The newly-introduced scheme has been benchmarked moderate against the CRISIL Dynamic Gilt Index.
According to the AMC, the product is suitable for investors who are seeking credit risk-free return over the medium-to-long term, and specifically in instruments that invest in government securities across maturities.
Parijat Agrawal, head-fixed Income, Union AMC said: “The prevailing elevated levels of yield on debt instruments are potentially a good entry point for investors. Sovereign securities carry the lowest level of credit risk. At current levels, it has a possible dual advantage in the form of higher accrual income, as also the possibility of capital gains as and when the interest rate cycles reverse in future. Investors with a three-year horizon can also benefit from long term capital gains taxation.”
G. Pradeepkumar, CEO, Union AMC, said: “The launch of Union Gilt Fund is in line with our constant endeavour to offer products that help our investors create wealth. With the introduction of this scheme, our debt product basket now offers schemes with varied credit and duration risk. We believe this scheme will serve all such investors who are looking for credit risk-free returns over a period of three years or more.”
