Kolkata: Aditya Birla Sun Life AMC Limited, a subsidiary of Aditya Birla Capital Limited (a significant non-bank financial services’ conglomerate), an investment manager to Aditya Birla Sun Life Mutual Fund (ABSLMF) has announced the launch of Aditya Birla Sun Life Nifty SDL Plus PSU Bond Sep 2026 60:40 Index Fund.
It is an open-ended scheme tracking the Nifty SDL Plus PSU Bond Sep 2026 60:40 Index. The NFO opens on September 15, 2021, and closes on September 23, 2021.
The fund has a defined maturity date with a target maturity of September 30, 2026, with a diversified portfolio of AAA-rated PSU Bonds and SDLs maturing on or before scheme maturity. Since it is an index fund its portfolio will seek to replicate the performance of Nifty SDL Plus PSU Bond Sep 2026 60:40 Index.
The portfolio index will comprise 60 per cent SDLs of the top 10 states/Union Territories and 40 per cent of the top 10 AAA rated PSU bonds curated on the basis of credit quality and liquidity scores. It will endeavour to hold bonds till their maturity with an aim to provide stable and predictable returns. Subsequently, there will be a quarterly rebalancing and review of the index constituents.
Commenting on the launch, A Balasubramanian, MD & CEO, Aditya Birla Sun Life AMC Limited, said, “The passive debt product combines the simplicity of traditional savings instruments with the predictability of returns, quality portfolio of State Government bonds and AAA-rated PSU bonds, target maturity period and the flexibility of an open-ended scheme, better liquidity and tax benefits. With yields becoming more attractive and inflation numbers cooling, investors’ real returns have gone up. Investors can potentially benefit from the current steepness in rates with the safety and liquidity of debt funds.
In a short and medium-term investment horizon, the spreads for 5 years appear attractive, especially for SDLs, compared to G-Secs, mainly driven by higher state borrowings as a percentage of overall borrowing. A mix of SDLs and AAA PSU Bonds can provide reasonably better returns along with the safety and liquidity of an open-ended fund. A roll down strategy is being employed to take benefits of reasonable yields”.
This index fund marks Aditya Birla Sun Life Mutual Fund’s foray into passive offerings in the fixed income space. In addition to this, the fund house has launched 3 new passive funds in the current financial year so far.
“As a fund house, we are looking at expanding our offerings in this segment that complements our existing strong presence through our active funds. Our goal is to develop a diverse product bouquet to implement differentiated and thematic investment strategies that consider long-term trends and values. In addition to our existing comprehensive product development strategy, we are also focusing on developing specific product categories such as our passive products in both equity and debt,” added Balasubramanian.
A target maturity fund has a specified maturity date that aligns with the maturity date of the bonds it has in its portfolio. This helps such funds provide predictive and stable returns. At maturity, an investor will get back their investment proceeds. Since it is a passively managed Index Fund, one can buy and sell at any time through the AMC during the tenure of the fund.
Indexation is an efficient way to reduce tax on returns by adjusting it for inflation. Indexation allows an investor to adjust buying price of one’s investment with inflation, thus making it more tax efficient. It is applied to long term returns on one’s investments.
Higher inflation means higher indexed purchase price, which means lower notional capital gains and lower tax. Long term capital gains are eligible for taxation at 20% post indexation in debt mutual funds if held for more than three years.
The portfolio of ABSL Nifty SDL plus PSU Bond Sep 2026 60:40 Index Fund is designed to mature on 30th September 2026 and currently offers a 5-year indexation benefit for investors coming in before 30th Sept 2021.