UTI Mutual Fund (UTI) has launched UTI Gilt Fund with 10 year Constant Duration, an open-ended debt scheme investing in government securities having a constant maturity of 10 years. The fund has a relatively high-interest rate risk and relatively low credit risk. The New Fund Offer opened on 18 July 2022 and closes on 26 July 2022.
The Scheme’s investment objective is to generate optimal returns with high liquidity by investing in a portfolio of government securities such that the weighted average portfolio maturity is around 10 years. However, there can be no assurance that the Scheme’s investment objective will be achieved.
Of the 16 categories of debt fund schemes, two categories are predominantly for government securities (G-secs). One is the Gilt fund category with a minimum investment of 80 percent in Gsecs across varying maturities. The second is the ‘Gilt Fund with 10 year constant duration’ category, with a minimum investment of 80 percent in Gsecs having a constant maturity of 10 years. Although there is no credit risk, the interest rate risk still exists in them.
Anurag Mittal, EVP & Deputy Head of Fixed Income, UTI AMC Ltd. and the Scheme’s Fund Manager, says, “Aiming to offer new investment opportunities via varied product, our latest fund launch, UTI Gilt Fund with 10 year Constant Duration, is a suitable offering for strategic allocation in a duration fund with sovereign exposures in the UTI Mutual Fund product suite. While diversified allocation to different asset classes like equity, fixed income, and gold has become an adage for investors, sovereign allocation within fixed income can offer a better value proposition by minimizing credit risk, providing high liquidity while maintaining tax efficiency needs to be given more consideration.”
Whom it suits
Investors with long-term investment goals, looking for high liquidity in their investment portfolio may consider investing in them. The category suits those investors who have a low-risk appetite for credit exposures, seek a high-quality portfolio, are comfortable with interest rate volatility, and are seeking tax-efficient reasonable returns.