Aditya Birla Sun Life Mutual Fund (MF) has launched Aditya Birla Sun Life Nifty G-sec Jun 2027 ETF, an open-ended Target Maturity Exchange Traded Fund (ETF) tracking the Nifty G-Sec Jun 2027 Index.
Target Maturity Funds are passive investments in debt securities that aim to replicate the composition of the underlying index and have a specific maturity date. These funds typically hold securities to maturity and follow a roll-down approach.
This underlying index is constructed with the five most liquid G-Sec instruments maturing during the twelve-month period ending June 30, 2027 based on the aggregate trading value & and with a minimum outstanding amount of Rs. 25000 crores. Each G-Sec is given a weight based on a composite score calculated based on liquidity and outstanding amount. The index is rebalanced on a quarterly basis.
As per the fund house, G-Secs are on track to be included in global indices. The increase in demand from foreign investors may lower the G-Secs yield owing to higher demand, increasing G-sec prices and value for domestic investors.
The scheme falls under the category of relatively high-interest rate risk and relatively low credit risk.
The interest rate risk – fluctuation in bond prices with change in interest rates in the economy – will be higher if the investments are not held till maturity. There is a risk of mark-to-market losses if the funds are withdrawn before maturity.
The new fund offer (NFO) period for subscription is closing on March 24, 2022. However, being an ETF, the scheme will be available for investing on the exchange soon. The entry load and exit load is nil for the scheme. The minimum subscription amount is ₹5,000 and in multiples of ₹1 thereafter.
The performance of the scheme would be benchmarked against the Nifty G-Sec Jun 2027 Index and its fund managers are Bhupesh Bameta & Harshil Suvarnkar.
In terms of taxation, when invested for over 3 years, gains are taxed at 20% after indexation. If held for less than 3 years, the short-term capital gains are taxed at slab rates of the individual.
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