Tata Mutual Fund on Friday launched an open-ended target maturity index fund, the CRISIL-IBX Gilt Index (April 2026), which comes with a relatively high interest rate risk but comparatively low credit risk. The NFO opens on September 23, 2022, and closes on September 28, 2022.
The fund house said the scheme provides returns that correspond to the “total returns of the securities as represented by the underlying index, subject to tracking error.”
The fund will invest in risk-free government securities with a predefined maturity period.
The scheme’s open ended structure provides quick liquidity to investors, while aiming to capture the current high government securities (G-Secs) yield.
Other benefits of the scheme include diversified investment portfolio, low transaction costs, fund rebalancing scope, and probable inclusion in global indices, which may boost demand.
Besides, target maturity instruments offer indexation benefits, and lower applicable tax rate.
The product is suitable for investors seeking to invest in constituents similar to CRISIL-IBX Gilt Index – April 2026, with a long-term investing goal. The downside of the scheme includes it doesn’t guarantee any assured returns or assure the scheme’s objective would be met.
The scheme’s minimum subscription amount is Rs 5,000, and thereafter, in multiples of Re 1.
Also, if redeemed on or before 30 days from the date of allotment, the load would be 0.25 per cent of the applicable net asset value (NAV), the fund house said in a press release.
The fund hopes to take advantage of the rising repo rate. The Reserve Bank of India has recently increased the repo rate from 4 per cent in April 2022 to 5.4 per cent in August 2022.
It further noted that the current attractive yield levels of G-Sec “reflect market belief that inflation has peaked,” indicating “we may be closer to the rate hike cycle.”
