SBI Mutual Fund NFO opens for subscribers till Dec 20; check out the key features

The SBI Mutual Fund launched SBI Long Duration Fund on Monday, which is a new fund offer (NFO). The offer, which opened on December 12 and will be on till December 20, 2022, is an open-ended debt scheme that aims to generate regular income in the long term by primarily investing in debt and money market instruments.  

The NFO can be defined as schemes launched on a first-subscription basis to fund securities purchases. It is very similar to IPOs, wherein a company launches its IPO to fund its expansion and further operations for growth. Here, asset management companies, like SBI Mutual Fund, through this scheme can invest in multiple asset classes for their customers and achieve their AUM (assets under management) goals. 

Features of SBI Long Duration Fund 

• The SBI Long Duration Fund will have a relatively high-interest rate risk and moderate credit risk. 
• The minimum application amount required is Rs 5,000 and thereafter, in multiples of Re. 1.  
• The benchmark of the scheme is CRISIL Long Duration Fund AIII Index. 
• The scheme aims to put investors’ money in government securities, which is suitable for investors looking to invest in a reasonable credit quality portfolio and have a longer investment horizon. 
• The SBI Mutual Fund has said that investors may benefit by locking in at prevailing yields by investing in this scheme where the duration is aligned with their investment goals. 
• As it is an open-ended fund, investors can withdraw their money at any point of time. 
• Investors locking in the scheme for more than 3 years can avail the benefit of better tax returns. 
• Compared to similar investment schemes with similar maturity periods, this fund promises to reduce reinvestment risk and offers tax-efficient returns due to indexation benefits. 
• However, the SBI Mutual Fund clearly says that there can be no assurance or guarantee that the investment objective of the scheme would be achieved. 
   

DP Singh, deputy managing director and chief business officer, SBI Mutual Fund: “The policy rate cycle is closer to peak and there is expected moderation in inflation levels. The forward-looking estimates on positive real returns make a good case for locking in sovereign yields at current levels. Our offering, SBI Long Duration Fund, will invest predominantly into government securities of longer tenure and money market instruments following a roll down strategy, with 7 years Macaulay Duration as the floor for reset.”