SBI Mutual Fund launched new fund offer SBI Inflation Indexed Bond Fund open ended scheme. The NFO Opens for subscription on 17 Oct 2014 & closes on 31 Oct 2014. No entry load will be applicable for the scheme.
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[wptabtitle] Scheme Details[/wptabtitle] [wptabcontent]Key Scheme Feature [ws_table id=”588″] [download id =””][ws_table id=”589″]
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Cheque Details : “SBI Inflation Indexed Bond Fund”
Who can Invest`
This product is suitable for investors:
- Seeking long term capital appreciation
- Investment predominantly in inflation indexed securities issued by Central Government, State Government and / or Corporate Issuer
[wptabtitle] Objective[/wptabtitle] [wptabcontent]Investment Objective for SBI Inflation Index Bond Fund Issue
- The investment objective of the scheme is to generate capital appreciation and income through investment in inflation indexed securities.
- However, there can be no assurance that the investment objective of the Scheme will be achieved.
Asset Allocation Pattern
- Inflation Indexed Securities – Minimum 70% & Maximum 100% Risk – Low to Medium
- Debt* and Money Market Instrument /Units of debt & Liquid mutual funds – Minimum 0% & Maximum 30% Risk – Low to Medium
- Investment strategy of the fund is to actively manage a portfolio of inflation linked securities to provide an inflation adjusted return. Portfolio will be constructed using a combination of strategies like yield curve positioning, duration and other tactical strategies.
Risk Profile of the Scheme
- SBI Inflation Indexed Bond Fund would be investing in inflation indexed securities, debt and money market instruments. The liquidity of the Schemes investment is inherently restricted by trading volumes and settlement periods. In the event of an inordinately large number of redemption requests, or of a restructuring of the scheme’s investment portfolio.
- Inflation Indexed Securities receive a coupon linked to rate of inflation as computed by the Wholesale price Index or the Consumer Price Index or any other Index used to calculate inflation.
Why Inflation Index Bond?
- No risk of inflation; only risk of movement in “real interest rate”
- No credit risk on government IIBs
- Downside protection at the level of original investment
- Diversification of portfolio with a low correlation asset class of inflation linked securities
- With Inflation linked securities, every time is a right time
- Irrespective of the level of inflation and interest rates, IIB’s always provides a fixed real return.
- Asset classes goes in or out of favour in capital markets. However the goal of risk averse investors remain the same: protection against real loss of value.
- IIBs provide growth of real value with protection of capital should always remain suitable.
- Current real yield of 3.90% – 4.00% on IIBs assuming WPI inflation at 5.00% implies a nominal yield of 8.90% – 9.00% (3.90% – 4.00% real yield + 5.00% WPI inflation)
- The nominal yield on same residual maturity 10 year Gsec instrument in 8.40% – 8.50%
Why should Invest?
- Earn positive real yield – The inflation indexed securities provide relatively consistent real returns by indexing both the principal and coupon payments for inflation
- Protection against inflation – High levels of prevailing inflation in India discourage investors to invest in fixed income securities. However IIBs investors may protect their financial asset against Inflation
- Low Risk – No credit / default risk on IIBs issued by government
- Diversification – Low correlation with other asset classes provides value through diversification of the portfolio
- Market Opportunity : The present market situation also presents an arbitrage opportunity to the fixed income investors to earn a better yield on IIBs with respect to Gsec instruments.
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