Aditya Birla Sun Life Mutual Fund Launches Debt Index Fund
The NFO opens on September 15, 2021 and closes on September 23, 2021.
Aditya Birla Sun Life AMC Limited, a subsidiary of Aditya Birla Capital Limited (a leading non-bank financial services conglomerate) and investment manager of Aditya Birla Sun Life Mutual Fund (ABSLMF) announced the launch of Aditya Birla Sun Life Nifty SDL Plus PSU Bond Sep 2026 60:40 Index fund. This is an open-ended program that tracks 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 and SDL bonds maturing on or before the plan maturity date. Since it is an index fund, its portfolio will seek to replicate the performance of the Nifty SDL Plus PSU Bond Sep 2026 60:40 index. The portfolio index will consist of 60% of SDL of the top 10 States / Union Territories and 40% of the top 10 AAA rated PSU bonds, managed on the basis of credit quality and liquidity ratings. It will strive to hold the bonds to maturity in order to provide stable and predictable returns. Thereafter, there will be a quarterly rebalancing and review of the index constituents.
Commenting on the launch, A. Balasubramanian, Managing Director and Chief Executive Officer, Aditya Birla Sun Life AMC Limited said: “The passive debt product combines the simplicity of traditional savings instruments with predictability of returns, a quality portfolio of AAA-rated government bonds and PSU bonds, a target maturity period and flexibility of an open-ended plan, better liquidity and tax advantages. As yields become more attractive and inflation numbers cool, real returns for investors have increased. Investors can potentially benefit from the current slope in rates with the safety and liquidity of debt funds. In a short and medium term investment horizon, 5-year spreads seem attractive, especially for SDLs, compared to G-Secs, mainly driven by higher government bonds as a percentage of overall borrowing. A mix of SDL 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 used to take advantage of reasonable returns ”.
This index fund marks Sun Life Aditya Birla Mutual Fund’s foray into passive fixed income offerings. In addition to this, the fund house has so far launched 3 new passive funds in the current financial year.
“As a fund company, we are looking to expand our offerings in this segment which complement our existing strong presence through our active funds. Our goal is to develop a diversified product mix to implement differentiated and thematic investment strategies that take into account long-term trends and values. In addition to our existing overall product development strategy, we are also focusing on the development of specific product categories such as our passive equity and debt products, ”added Mr. Balasubramanian.
A target maturity fund has a specified maturity date that matches the maturity date of the bonds it has in its portfolio. This helps these funds provide predictable and stable returns. At maturity, an investor will get back the proceeds of his investment. Since this is a passively managed index fund, one can buy and sell at any time through the AMC during the life of the fund. Indexation is an effective way to reduce the tax on yields by adjusting it for inflation. Indexation allows an investor to adjust the purchase price of his investment according to inflation, making it more tax efficient. It applies to the long-term returns of its investments. Higher inflation means a higher indexed purchase price, which means lower notional capital gains and lower taxes. Long-term capital gains are taxable at 20% after indexation in debt UCITS if they have been held for more than three years. The ABSL Nifty SDL plus PSU Bond Sep 2026 60:40 index fund portfolio is designed to mature on September 30, 2026 and currently offers a 5-year indexing advantage for investors entering before September 30, 2021.
* Investors should consult their financial advisers when in doubt about the suitability of the product.