Did you know that you could invest in funds that follow similar strategy to FMPs (Fixed maturity Plans) in such a way the they keep reducing their duration risk with each passing year but still give you the option to exit anytime without exit load?
Funds that follow roll down strategies offer you this option. In a Roll down strategy, ordinarily the average maturity of the scheme’s portfolio is unlikely to increase significantly and may be expected to generally reduce with the passage of time, subject to intermittent periods of volatility in the maturity profile owing to AUM movement and market conditions.
IDFC Banking and PSU Debt Fund is one such fund. The fund seeks to invest in high quality debt instruments issued by banks, PSUs and PFIs, currently 100% of the portfolio is in AAA and equivalent instruments. With current average maturity of 2.57 years, it is the intention of the fund manager to keep reducing its average maturity. The fund has been following this strategy since late 2018. Below is the chart of the monthly average maturity of the scheme
Irrespective of the interest rate view whether bullish or bearish the fund intends to continue to roll down its maturity. This is in contrast to an actively managed fund where depending on the fund manager’s view, he/she may choose to increase or decrease fund’s average maturity. Due to this feature (roll down), an investor is able to better gauge the risk/reward potential of the portfolio across investment horizon.
IDFC Banking and PSU Debt Fund is a suitable proposition for an investor’s core allocation. In other words, given that the duration risk is limited and that the portfolio has a high credit quality instruments, it is suitable to form part of investors’ bulk allocation towards fixed income mutual funds. Given its current average maturity profile of 2.57 years, the fund has a minimum recommended investment horizon of 2 years currently. This is subject to change as the fund rolls down its average maturity over time. Do note that given this fund is open ended and does not have any exit load, the investor also enjoys the flexibility to redeem his/her savings at any point in time.
Note: The Strategy stated herein is tactical in nature and the same is subject to change as per investment strategy and asset allocation pattern provisions stated in Scheme Information Document.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
The Disclosures of opinions/in house views/strategy incorporated herein is provided solely to enhance the transparency about the investment strategy / theme of the Scheme and should not be treated as endorsement of the views / opinions or as an investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document has been prepared on the basis of information, which is already available in publicly accessible media or developed through analysis of IDFC Mutual Fund. The information/ views / opinions provided is for informative purpose only and may have ceased to be current by the time it may reach the recipient, which should be taken into account before interpreting this document. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision and the security may or may not continue to form part of the scheme’s portfolio in future. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. The decision of the Investment Manager may not always be profitable; as such decisions are based on the prevailing market conditions and the understanding of the Investment Manager. Actual market movements may vary from the anticipated trends. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alterations to this statement as may be required from time to time. Neither IDFC Mutual Fund / IDFC AMC Trustee Co. Ltd./ IDFC Asset Management Co. Ltd nor IDFC, its Directors or representatives shall be liable for any damages whether direct or indirect, incidental, punitive special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.
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