Should You Invest in Edelweiss NIFTY PSU Bond Plus SDL Index Fund – 2027?
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Investors consider investment in debt mutual funds to be less risky, unlike the volatile nature of equity mutual funds. Many risk-averse investors tend to invest in debt mutual funds to maintain stability and liquidity in their investment portfolio.
Debt mutual funds possess three major risk i.e. credit risk, liquidity risk and interest rate risk. There are few categories under debt mutual funds that aim to mitigate these risks, such as Target Maturity Debt Funds. These are debt funds that have a specified maturity date, which is aligned with the expiry date of the bonds they have in the portfolio.
Target Maturity Debt Funds carry comparatively lower interest rate risk and provide more predictive and stable returns, which is suitable for investors who prefer the predictability of returns like the one offered by bank fixed deposits.
As passive investing is gaining traction, many mutual fund houses have launched Target Maturity Dated Index Funds. These funds assist investors to participate and invest passively in the benchmark index that consist of high quality AAA rated PSU Bond and SDLs, rather than investing in bonds directly.
Edelweiss Mutual Fund has launched Edelweiss NIFTY PSU Bond Plus SDL Index Fund - 2027. It is an open-ended target maturity Index Fund, predominantly investing in the constituents of Nifty PSU Bond Plus SDL Apr 2027 50:50 Index.
The scheme will be passively managed and has a defined maturity date of April 30, 2027. At maturity, investors will get back their investment proceeds, whereas the scheme's assets will be invested in AAA CPSE instruments and state development loans.
Table 1: Details of Edelweiss NIFTY PSU Bond Plus SDL Index Fund - 2027
| Type |
An open-ended target maturity Index Fund predominantly investing in the constituents of Nifty PSU Bond Plus SDL Apr 2027 50:50 Index |
Category |
Index Fund |
| Investment Objective |
The investment objective of the scheme is to track the Nifty PSU Bond Plus SDL Apr 2027 50:50 Index by investing in AAA rated PSU Bonds and SDLs, maturing on or before April 2027, subject to tracking errors. However, there is no assurance that the investment objective of the Scheme will be realized and the Scheme does not assure or guarantee any returns. |
| Min. Investment |
Rs 5000/- and in multiples of Re 1 thereafter. Additional purchase Rs 500/- and in multiples of Re 1 thereafter. |
Face Value |
Rs 10/- per unit |
| SIP/STP/SWP |
Available |
| Plans |
|
Options |
- Growth
- Income Distribution cum Capital Withdrawal Option
|
| Entry Load |
Not Applicable |
Exit Load |
- 0.15% upto 30 days
- Nil after 30 days
|
| Fund Manager |
Mr. Dhawal Dalal
Mr. Gautam Kaul |
Benchmark Index |
Nifty PSU Bond Plus SDL Apr 2027 50:50 Index |
| Issue Opens: |
September 30, 2021 |
Issue Closes: |
October 08, 2021 |
(Source: Scheme Information Document)
The investment strategy for Edelweiss NIFTY PSU Bond Plus SDL Index Fund - 2027 will be as follows:
Edelweiss NIFTY PSU Bond Plus SDL Index Fund - 2027, will predominantly invest in AAA rated PSU bonds and SDLs maturing within the maturity date of the scheme. The scheme is a Target Maturity Date Index Fund, which seeks to track the Nifty PSU Bond Plus SDL Apr 2027 50:50 Index subject to tracking error.
The scheme will follow buy & hold investment strategy in which existing bonds will be held till maturity unless sold for meeting redemptions, payment of IDCW, rebalancing requirement or optimizing portfolio construction process. The endeavour will be to hold bonds till their maturity with an aim to provide stable and predictable returns.
The portfolio of eligible securities invested by the scheme is expected to have, in aggregate, fundamental characteristics such as modified duration, weighted average maturity, aggregate credit ratings, aggregate Yield To Maturity (YTM) etc. along with other liquidity parameters predominantly in line with Nifty PSU Bond Plus SDL Apr 2027 50:50 Index.
The scheme will invest in PSU Bonds and SDLs that meet the eligibility criteria of the underlying Index that will have similar maturity as that of the Fund i.e., 30th April 2027.
About the benchmark
Nifty PSU Bond Plus SDL Apr 2027 50:50 Index seeks to measure the performance of portfolio of AAA rated bonds issued by government owned entities & SDLs maturing during the six month period ending April 30, 2027.
Index represents the performance of maturity-targeted segment of the PSU bond and SDL market. The Index follows a unique structure with defined maturity date and the proportion of investment into AAA rated bonds issued by government owned entities and SDLs is equally divided i.e. 50% in each category.
The following is the list of the top constituents under the index by their weightage as of September 21, 2021:
(Source: Edelweiss NIFTY PSU Bond Plus SDL Index Fund 2027 PPT)
Index will select bonds in a transparent manner through a 3-step process.
Selection - One ISIN of each PSU issuer will be selected based on liquidity score. Most recently issued 10 SDLs by top 10 states/UTs selected based on their outstanding amount. Both PSU Bonds and SDLs should mature within 6 months prior to the maturity of Index.
Weightage - Each issuer that is part of the PSU Bonds portion is given equal weight as of the base date of the index. 50% AAA rated bonds issued by PSU and 50% SDLs.
Rebalancing - Quarterly Rebalancing and review of Index constituents.
Under the normal circumstances, the asset allocation of the fund will be as under:
Table 2: Asset Allocation for Edelweiss NIFTY PSU Bond Plus SDL Index Fund - 2027
| Instruments |
Indicative Allocation (% of net assets) |
Risk Profile |
| Minimum |
Maximum |
High/Medium/Low |
| Bonds issued by PSUs forming part of the bonds portion of Nifty PSU Bond Plus SDL Apr 2027 50:50 Index |
95 |
100 |
Low to Medium |
| State Development Loans (SDLs) forming part of the SDL portion of Nifty PSU Bond Plus SDL Apr 2027 50:50 Index |
95 |
100 |
Low to Medium |
| *Money Market Instruments including cash and cash equivalents |
0 |
5 |
Low |
(Source: Scheme Information Document)
*Money Market Instruments will include only treasury bills and government securities having a residual maturity up to one year, Tri-Party Repos and any other like instruments as specified by the Reserve Bank of India from time to time.
Who will manage Edelweiss NIFTY PSU Bond Plus SDL Index Fund - 2027?
Mr Dhawal Dalal and Mr Gautam Kaul will be the dedicated fund managers for this scheme.
Mr Dhawal Dalal is a Chief Investment Officer - Fixed Income at Edelweiss Asset Management Company Ltd. His qualification includes B.E and MBA. He has over 17 years of experience in the investment management function. Prior to this he was associated with DSP BlackRock Investment Managers Pvt. Ltd. as an Executive Vice President, Head of Fixed Income and with Merrill Lynch Investment Managers as an Assistant Portfolio Manager.
The other schemes managed by Mr Dhawal Dalal are Edelweiss Money Market Fund, Edelweiss Banking and PSU Debt Fund, Edelweiss Corporate Bond Fund, Edelweiss Government Securities Fund, Edelweiss Equity Savings Fund (Debt Portion), Edelweiss Arbitrage Fund (Debt Portion), BHARAT Bond ETF - 2023, BHARAT Bond ETF - 2030, BHARAT Bond FOF - 2023, BHARAT Bond FOF - 2030, BHARAT Bond ETF - 2025, BHARAT Bond ETF - 2031, BHARAT Bond FOF - 2025, BHARAT Bond FOF - 2031, Edelweiss NIFTY PSU Bond Plus SDL Index Fund - 2026.
Mr Gautam Kaul is a Fund Manager - Fixed Income at Edelweiss Asset Management Company Ltd. He is an MBA from Pune University and has over 15 years of experience in fixed income market. Prior to this, he was associated with IDBI Asset Management Limited and with Invesco Asset Management (India) Pvt. Ltd. as Fund Manager.
The other schemes managed by Mr Gautam Kaul are Edelweiss Liquid Fund, Edelweiss Money Market Fund, Edelweiss Banking & PSU Debt Fund, Edelweiss Government Securities Fund, Edelweiss Overnight Fund, Edelweiss Fixed Maturity Plan - Series 49, Edelweiss Fixed Maturity Plan - Series 55, Edelweiss Balanced Advantage Fund (Debt Portion), Edelweiss Aggressive Hybrid Fund (Debt Portion), Edelweiss Corporate Bond Fund, BHARAT Bond ETF - 2023, BHARAT Bond ETF - 2030 and BHARAT Bond FOF - 2023.
Fund Outlook - Edelweiss NIFTY PSU Bond Plus SDL Index Fund - 2027
Edelweiss NIFTY PSU Bond Plus SDL Index Fund - 2027 is an investment option enabling you to invest in high quality AAA rated PSU Bonds and State Development Loans (SDLs) of India.
The scheme offers stability to your portfolio, as its bond like structure with fixed maturity provides visibility and stable returns at maturity. The fund will invest only in constituents that are eligible as per the index methodology and Investment in diversified basket of AAA PSU Bonds and SDLs.
Being an index fund, it will be passively managed by the fund manager with an aim to minimise the tracking error. Since this is a passively managed fund, the expense will be relatively low. Moreover, there is no lock in period.
The scheme may offer high safety and liquidity by investing in various high quality AAA rated bonds backed by the government, thus eliminating the credit risk. However, it is still prone to interest rate risk.
Edelweiss NIFTY PSU Bond Plus SDL Index Fund - 2027 is suitable for investors seeking to generate income over long term, have a moderate risk appetite and a long investment horizon equivalent to the maturity of the scheme.
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Warm Regards,
Mitali Dhoke
Jr. Research Analyst
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