New Fund Offer: Invest as low as Rs 5000 in quality PSU, State Govt Bonds; Check risks, benefits

By: |
March 11, 2021 2:54 PM

Edelweiss Asset Management Company Limited has announced the launch of Edelweiss NIFTY PSU Bond Plus SDL Index Fund - 2026.

NCDs are loan-linked bonds that cannot be converted into stocks and usually offer higher interest rates than convertible debentures.

Edelweiss NIFTY PSU Bond Plus SDL Index Fund 2026: Edelweiss Asset Management Company Limited has announced the launch of Edelweiss NIFTY PSU Bond Plus SDL Index Fund – 2026. Passively managed, is a first of its kind index fund which will invest in AAA rated PSU Bonds as well as State Development Loans (SDL).

Edelweiss said in a statement that the new Edelweiss NIFTY PSU Bond Plus SDL Index Fund – 2026 is a Debt Index Fund with six-year maturity. While this product will also see volatility, there will be no interest rate risk for those who plan to hold until maturity. “If you give it the time needed, this passively managed corpus should score over rival debt instruments due to low costs and high visibility of returns,” the AMC said.

What are the risks with rival debt instruments?

Radhika Gupta, MD & CEO, Edelweiss Asset Management, told FE Online that existing debt funds, because of their open-ended nature, carry duration risk even if you stay invested for a long period. Hence, returns keep fluctuating due to changes in interest rates, especially in a high duration debt fund.

Volatility vs Interest rate risk: How this new fund offer addresses both?

Gupta said that in target maturity funds, duration reduces as the fund approaches its maturity. This gives good visibility of returns. Even if interest rates change in between, it will have no impact on returns for investors who stay invested till the end of maturity.

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Who should invest in this fund?

Investors who want to invest for 3 to 5 years and do not want interest rate fluctuations to impact their returns may invest in this fund. Also, investors who want to look beyond traditional investment avenues to earn better post-tax returns can invest in this fund as it provides indexation benefit, said Gupta.

How much can you invest?

Edelweiss said that one can invest as low as Rs 5,000. The fund will have a defined maturity date of April 30, 2026. At maturity, investors will get back their investment proceeds.

The fund will aim to hold the bonds till maturity to provide stability and visibility of returns to investors. The AMC also said that taxed at 20 per cent post indexation, this fund will be more tax efficient as compared to traditional avenues.

When can you invest in this fund?

The Edelweiss NIFTY PSU Bond Plus SDL Index Fund – 2026 NFO will be open for subscription between March 10 to March 16, 2021.

According to Edelweiss, its new fund offer is a first ever, open-ended, Target Maturity Index Fund that will predominantly invest in the constituents of NIFTY PSU Bond Plus SDL 50:50 Index. The proportion of investments of AAA PSU Bonds and SDLs will be equally divided with a weightage of 50% each.

(Please consult your financial advisor before investing)

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