Skip to main content

Debt Funds After Scheme Merger

Best SIP Funds Online 


The SEBI circular on categorization and rationalization of mutual fund schemes is set to change the way the Indian mutual fund industry offers their products. It will do away with duplication of fund mandates and lack of clarity in fund objectives.

It is not a sea change as it is more of a rationalization, but the parameters have been defined and there are going to be changes in the way funds are managed. Let us look at the new contours of debt fund management.

There will be 16 categories of funds and an AMC may have only one fund in each category.


Here the duration refers to 'Macaulay Duration'. Macaulay Duration is somewhat similar to Modified Duration. While Macaulay Duration calculates the weighted average time of maturity before the cash flows on bond starts, modified duration measures the price sensitivity of a bond due to change in the yield to maturity. Typically, Macaulay Duration is marginally higher than Modified Duration.

Long duration fund:

The duration of the fund has to be more than 7 years. That means, even if fund manager expects rates to move up, he cannot bring down portfolio maturity to make the fund defensive. Hence, it will be a true long duration fund across market cycles. Investors with high risk appetite and long term horizon can invest in such a fund.  

Dynamic fund:

There is no limitation in terms of portfolio maturity or duration. It will invest across duration. The fund manager can increase or decrease the portfolio maturity based on his views on market movement. The strategy of this category of funds remains unchanged.

Gilt fund: This category has been defined in terms of composition only; minimum 80% has to be in gilts. Maturity can be across i.e. the fund manager can play either short or long on the yield curve, depending on his views.

Medium to long duration fund:

The duration is defined as 4 to 7 years. So far, this category did not exist in the real sense, only a handful of AMCs have a product that adheres strictly to this definition. Now that it is defined, investors will have a choice in this duration bracket.

Medium duration fund:

With a duration of 3 to 4 years, it will be a proper medium duration category.

Short duration fund: Currently, the average maturity in short duration funds ranges between 2 and 4 years. Now the definition is 1 to 3 years i.e. in terms of duration, not maturity. There will not be any short maturity gilt fund but one fund across maturities.

Corporate bond funds:

This category has been defined, not in terms of portfolio duration, but portfolio composition. Minimum 80% has to be invested in top rated corporate bonds. Currently, the term is used as a synonym of credit-based funds, which has now been done away with. The portfolio duration is expected to be similar to short duration funds.

Credit risk fund:

Interestingly, the term risk has been used and SEBI has stated that terms like Credit Opportunities Fund, High Yield Fund, Credit Advantage and so on cannot be used. Minimum 65% has to be invested in lower rated (below highest rated) instruments. The strategy remains same but the terminology has changed. Portfolio maturity is likely to be manage like a short duration fund.

Conclusion

Investors will have more clarity e.g. what is the duration range of a short duration fund or long duration fund or what is the credit quality of a corporate bond fund. The terminology of credit risk funds will be more appropriate now.

The advisor can now recommend funds with a higher degree of conviction as the AMC cannot tweak fund strategy, they have to remain true to label throughout. Simply put, life becomes easier for distributors with better clarity.




SIPs are when Stock Market is high volatile. Invest in Best Mutual Fund SIPs and get good returns over a period of time. Know Top SIP Funds to Invest Save Tax Get Rich

For further information on Top SIP Mutual Funds contact Save Tax Get Rich on 94 8300 8300

OR

You can write to us at

Invest [at] SaveTaxGetRich [dot] Com

Popular posts from this blog

ICICI Pru Mutual Fund Dividend

ICICI Prudential Mutual Fund has announced dividend under the following schemes: Scheme Dividend ( Rs /unit) ICICI Pru Capital Protection Oriented Ser V Plan B-D 0.03611325 ICICI Pru Capital Protection Oriented Ser V Plan B Direct-D 0.03611325 ICICI Pru Balanced Advantage Direct-DM 0.06 The record date has been fixed as February 08, 2017. ------------------------------ ------ Invest Rs 1,50,000 and Save Tax upto Rs 46,350 under Section 80C. Get Great Returns by Investing in Best Performing ELSS Funds Top 4 Tax Saver Mutual Funds for 2017 - 2018 Best 4 ELSS Mutual Funds to invest in India for 2017 1. DSP BlackRock Tax Saver Fund 2. Invesco India Tax Plan 3. Tata India Tax Savings Fund 4. BNP Paribas Long Term Equity Fund Invest in Best Performing 2017 Tax Saver Mutual Funds Online Invest Best Tax Saver Mutual Funds Online Download Top Tax Saver Mutual Funds  Application Forms For further information contact  SaveTaxGetRich on 94 8300 8300 ------------------------------ ------ Leave y...

Hidden Bank Fees

  What Banks Hide From Customers Imagine after a peaceful and exciting holiday you receive your bank statement with steep charges. You then rush to your bank and start confronting staff members and to your dismay, you come to know that the high end debit card was charged very heavily. Wouldn't this cause damage to your finances? So remember, the world outside is full of deceptive and double cheating people. Unethical practices are always used by company sales person in order to meet the target. Credit card companies, mutual funds and bank institutions always play dirty tricks to lure customers and the practices are rampant. So here's how you should be careful while dealing with your banks: High End Debit Card Charges While opening an account with a bank you opt for a debit card with minimal charges. But later on when you upgrade your card and opt for high end debit card the annual charge rise by a good amount. Though such a card has slew of features but it all comes at a high ...

Partial withdrawal from PPF

  Public Provident Fund (PPF) account has a lock in period   If you opened a PPF account to meet your retirement needs,, think twice about withdrawing from this fund before retirement. But provided it's an emergency here are the rules. Public Provident Fund (PPF) account has a lock in period before which you cannot withdraw your money.   The partial withdrawal is allowed after the completion of 6 financial years . This means that you will be allowed a partial withdrawal from 1 April 2017. The maximum partial withdrawal allowed is the least of the following: 50 percent of the account balance at the end of fourth financial year, 31 March 15 50 percent of the account balance of the end of previous financial year, 31 March 17.   There's a loan option available on your PPF account between the fourth and the sixth financial year. You can obtain a loan of up to 25 per cent of the balance in your account. However, this will attract interest of 2 percent more than the prevailing ...

Updating a minor PAN card upon becoming adults

  Updating a minor's PAN card once they become adults A PAN card issued in the name of a minor does not contain the minor's photograph or signature, and therefore, cannot be used as a valid proof of identity. Once a minor PAN card holder turns 18, the relevant changes must be made in the PAN records. A new card is then issued bearing a photograph and signature. Application The applicant is required to fill up the "Request for new PAN card andor changes or correction in PAN data" form. The form can be filled up online by accessing NSDL's Tax Information Network website and clicking on the online PAN application tab. Information The applicant must mention the existing PAN number in the application and check the `photo mismatch' and `signature mismatch' boxes, and submit the online form. The form must also be printed out, signed by the applicant, and submitted along with two photographs. Documents Identity and address proof in the form of a copy of the app...

ICICI Prudential Value Fund Series I

Invest In Tax Saving Mutual Funds Online Download Tax Saving Mutual Fund Application Forms Buy Gold Mutual Funds Call 0 94 8300 8300 (India)   Performance of the scheme will be benchmarked to the S&P BSE 500 index ICICI Prudential Value Fund is a closeended equity scheme. The scheme will have tenure of three years (1095 days) from the date of allotment of units. Units of the scheme will be fully redeemed at the end of the maturity period, unless rolled over. NFO PERIOD:   The NFO is open from October 18 to 28. The minimum subscription during the NFO period is Rs 5,000. SCHEME OBJECTIVE:   The scheme aims to provide long-term capital growth by investing in a well-diversified portfolio of equity and equity-related securities. INVESTMENT STRATEGY:     The fund proposes to invest in stocks that are trading at a huge discount in the BSE 500 index and plans to book profit and distribute dividen...
Related Posts Plugin for WordPress, Blogger...
Invest in Tax Saving Mutual Funds Download Any Applications
Transact Mutual Funds Online Invest Online
Buy Gold Mutual Funds Invest Now