Axis Mutual Fund on Wednesday launched a new fund offer (NFO) for its Axis Long Duration Fund. This open-ended debt scheme invests in instruments in a way that the portfolio’s Macaulay duration is more than seven years.
The scheme has a relatively high-interest rate risk and low credit risk. The NFO will run from December 7 to 21, 2022.
Its minimum subscription amount is Rs 5,000, and after that, in multiples of Re 1. The fund will track the NIFTY Long Duration Debt Index A – III.
In a press release, the fund house said the fund’s objective is “to generate optimal returns consistent with moderate levels of risk”. Devang Shah, Kaustubh Sule, and Hardik Shah will jointly manage the fund, it said.
Commenting on the fund, Chandresh Nigam, managing director and chief executive officer of Axis AMC, said, “Fixed income strategies have the potential to be an attractive option for investors, especially those in the middle of their career lifecycle and wish to plan for post-retirement.
The fund offers a long-term income solution at retirement as it will invest in long-dated government securities. Furthermore, the capital appreciation in the portfolio would complement the income, Axis AMC said.
It noted that long bond yields remained largely stable and above the inflation levels over the last 20 years.
Debt mutual funds have the potential to offer significant tax efficiencies and market-linked returns compared to traditional retirement products, Nigam said. “Using systematic investing solutions like SIP & SWP, investors can create a flexible investment plan using long-dated government bonds.”
Long-Dated Securities: It offers investors an opportunity to invest at the peak of the interest rate cycle, thereby allowing them to lock in long-term rates.
Portfolio: It will invest in government securities with a 30 plus years horizon, thereby providing investment in sovereign (SOV)-rated instruments to investors.
Reduced Volatility: Debt market investment generally has reduced volatility in the long term compared to equity markets.
Liquidity: Investors can profit from indexation benefits and limited taxation at the withdrawal time as there is no entry or exit load.
A Systematic Withdrawal Plan (SWP) facility allows unit holders to withdraw a specified sum of money periodically—monthly, quarterly, half-yearly, yearly, etc., from their investment corpus.
Thus, the investor can create a regular cash flow from the invested corpus while the balance stays invested in the fund to generate market-linked returns.
