Edelweiss Asset Management Ltd., on Friday launched a short-duration index fund named Edelweiss CRISIL IBX 50:50 Gilt Plus SDL Short Duration Index Fund to capitalise on the favourable interest rate environment, and adding to its growing market share in the passive debt category. The new fund offer (NFO ) will stay open for subscription from January 27 to February 10, 2023, it said in a press release.
Commenting on the NFO, Radhika Gupta, managing director and chief executive officer of Edelweiss AMC said: “The Edelweiss CRISIL IBX 50:50 Gilt plus SDL short-duration index fund is poised to become a game-changer in the industry. With many active debt funds underperforming their benchmark due to high costs and biased duration calls, this fund offers better predictability on asset allocation, credit quality, and duration, and is a low-cost substitute over other active funds for short-term investments.”
The fund seeks to imitate the CRISIL IBX 50:50 Gilt Plus SDL Short Duration Index by creating a diversified portfolio of government bonds and state development loans (SDLs), subject to tracking errors.
Passive funds are relatively low cost and considered free from any bias as there is no active fund manager. The low cost adds up in the returns, making these index funds attractive for investors. Index funds are ideal for investors looking for fixed income as a part of their asset allocation strategy.
· The fund will invest 50 per cent of its assets in government bonds and 50 per cent in SDLs.
· The G-Sec (government securities) portion will be constructed by selecting the most liquid government bonds, with a minimum outstanding of Rs 10,000 crores and duration of 1 to 5 years.
· On the other hand, the SDL portion will be constructed by first selecting the most liquid state issuers falling in each of the eligible duration buckets and then by selecting the most liquid ISIN from each of these buckets with a minimum outstanding of Rs. 500 crores.
· The index will be rebalanced every quarter on the first business day of the month.