TRUST Asset Management has announced the launch of TRUSTMF Corporate Bond Fund, an open-ended debt scheme that will predominantly invest in AA+ and above rated corporate bonds.
Corporate bond funds are debt mutual fund schemes that invest at least 80 per cent of their assets in corporate bonds, which have relatively high interest rate risk and moderate credit risk.
The TRUST AMC’s latest fund, the sixth edition to its fixed income product portfolio, aims to benefit from the current high yields at the shorter end of the yield curve.
The new fund offer (NFO) runs from January 9 to 18, 2023.
Commenting on the fund, Sandeep Bagla, CEO of TRUST Mutual Fund, in a press release on Tuesday said, “In the current environment, investors can expect both interest income and capital gains. It would be ideal for investor with a time horizon of more than a year and is looking for a relatively safe option.”
Fund manager Anand Nevatia, who manages all schemes of TRUST Mutual Fund, said, “Since March 2022, market yields in the 1-2 year corporate bond segment have risen by almost 250 bps (basis points) to 7.50%, and the corporate yield curve is mostly flat beyond two years.”
He added while core inflation is still a concern, with the possibility of a high-interest scenario carrying on, the fund aims to benefit from the higher yields and “maintain a maturity of 2-3 years.”
Who Should Invest?
The fund is suitable for investors looking for optimal returns over the medium to long term. Since it will invest mainly in AA+ and above rated corporate debt instruments, the credit risk is moderate. Corporate bond funds also enjoy significant taxation benefit over traditional fixed-income securities. However, these funds may have interest rate risks depending on the duration of the schemes.
Key Highlights
• NFO runs from January 9 to 18, 2023.
• The benchmark is CRISIL Corporate Bond Fund Bill Index.
• Opportunity to invest in short end (up to 2 years) as corporate bond spreads are elevated.
• The fund seeks to build top-quality portfolio of corporate bonds.
• High accrual yield as interest rates have gone up.
• However, interest rate risk is relatively high.
• Duration management through limited part of the portfolio.
