Nippon India Mutual Fund has announced the launch of an open-ended target maturity index fund investing in government securities (G-Secs) and state development loans (SDL).
The Nippon India Nifty SDL plus G-Sec June 2029 Maturity 70:30 Index Fund will invest in the constituents of Nifty SDL Plus G-Sec Jun 2029 70:30 Index.
The fund has a relatively high interest rate risk and low credit risk and is suitable for investors looking for long-term investment horizon.
The new fund offer (NFO) opens on February 6 and closes on February 14, 2023. The minimum subscription amount is Rs 1,000 each during the NFO, and after in multiples of Re 1. It will re-open for sale and repurchase on February 24. It will have no entry or exit load.
The plan seeks to provide investment returns corresponding to the total returns of the securities as represented by the Nifty SDL plus G-Sec Index before expenses, subject to tracking errors.
Allocation
It will invest 95-100 per cent in government securities (G-Secs) and state development loans (SDLs) representing the Nifty SDL plus G-Sec Jun 2029 70:30 Index. The share in cash and cash equivalents will be 0-5 per cent.
The fund house said the money market instruments will include treasury bills and government securities with residual maturity up to one year and tri-party repos on G-Secs or Treasury bills.
In normal times, the scheme’s exposure to money market instruments will be in line with the asset allocation table, but in the case of maturity of SDLs/G-Secs in the portfolio, the reinvestment will be in line with the index. It will not participate in repo in corporate debt.
The scheme will neither make any investment in ADR/ GDR/ Foreign Securities/ Structured Obligations / Securitized Debt/Credit Enhancement nor will it engage in short selling and securities lending. Further, it shall not take any exposure in derivative instruments.
In addition, the cumulative gross exposure through debt and money market instruments and other assets will not exceed 100 per cent of the net assets of the scheme.
Risk Mitigation
The fund house said it will adopt robust mitigate risk practices like internal policies on investments and valuations, procedures for monitoring investment restrictions and effective implementation of various Securities and Exchange Board of India (Sebi) norms.
Investment Strategy
The Nippon India Nifty SDL plus G-Sec fund is a passively managed index fund and is designed to track the performance of the Nifty SDL plus G-Sec Jun 2029 70:30 Index.
As part of its buy and hold strategy, it will retain the existing SDLs & G-Secs till maturity unless sold for meeting redemptions requirement. The scheme offers both direct and regular plans, with options for payout and reinvestment.
