Opportunity to Invest in US treasuries: ABSL MF launches schemes for Indian investors

Aditya Birla Sun Life Mutual Fund has launched 2 new fund offers, Aditya Birla Sun Life US Treasury 1-3 Year Bond ETFs Fund of Funds and Aditya Birla Sun Life US Treasury 3-10 Year Bond ETFs Fund of Funds. These open-ended funds of funds invest in units of ETFs focusing on US Treasury Bonds with maturities between 1-3 years and 3-10 years, respectively. The 2 New Fund Offers (NFO) will be open for subscription from October 16, 2023 to October 30, 2023.

The FED funds rate is at a multi-decade high and the potential for rate cuts in 2024 has created an attractive investment opportunity in US government-grade debt. The difference between India and US sovereign rates at a decadal low also provides a great opportunity to invest in US treasuries.

Aditya Birla Sun Life US Treasury 1-3 Year Bond ETFs Fund of Funds is suitable for investors with shorter investment horizon and who are relatively risk averse. The benefits include higher absolute yield, lower volatility and duration risk and an opportunity to earn capital gains.

Aditya Birla Sun Life US Treasury 3-10 Year Bond ETFs Fund of Funds is suitable for investors with long term investment horizon and who have a higher risk profile. The benefits include locking in higher yield for long-term, adding duration to portfolio and an opportunity to earn capital gains.

NR has mostly depreciated against the USD over the past 15 years. Hence holding exposure in USD can be a good hedge against the depreciating INR. US Treasuries, backed by the US government, provide stability, high current yields, and risk diversification for Indian investors. To enter the US Treasury market, consider investing through Fund of Fund. This route is superior to the traditional Liberalised Remittance Scheme (LRS) mode of investing in the US market due to the non-applicability of Tax Collected at Source (TCS) and the absence of capping value.

Commenting on the new fund offers, A. Balasubramanian, Managing Director & CEO, Aditya Birla Sun Life AMC Ltd, said, “Our new passive offerings present an opportunity for investors to potentially earn higher returns, gain currency diversity, and access a trusted treasury market. It enables the investor to tap into the unique opportunity arising from a temporary yield curve dislocation in one of world’s largest debt markets. At ABSLAMC, we always strive to offer innovative solutions that suit our investors’ changing needs.”