Bajaj Finserv Asset Management has unveiled its latest offering, the Bajaj Finserv Banking and PSU Fund. With the new fund offer (NFO) opening on October 25, 2023, and continuing until November 15, 2023, this financial instrument is aimed at piquing the interest of investors looking for a stable avenue for capital growth. The NFO will open for subscription on an ongoing basis on or before November 15, 2023.

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The fund will be jointly managed by Siddharth Chaudhary, Senior Fund Manager - Fixed Income, and Nimesh Chandan, CIO.

Understanding the NFO

This new entrant in the mutual fund arena is an open-ended debt scheme, predominantly investing in debt instruments of banks, Public Sector Undertakings (PSUs), Public Financial Institutions, and Municipal Bonds. It's essential to note that the fund carries relatively high-interest rate risk and moderate credit risk.

The scheme's primary objective is to generate income by investing predominantly in debt and money market securities issued by Banks, PSUs, PFIs, Municipal Bonds, and Reverse repos.

Additionally, the fund may include sovereign securities issued by the Central government and state governments, as well as any security unconditionally guaranteed by the government of India. However, it's crucial to understand that there is no assurance or guarantee that the investment objective of the scheme will be achieved, the fund house said.

Investment focus

The Bajaj Finserv Banking and PSU Fund focuses on riding the yield curve, particularly around the five-year maturity profile, which aims to optimise performance and provide investors with a decent risk-reward proposition in the current market with a predominantly flat yield curve, the fund house stated.

The NFO is expected to benefit from the anticipated downward shift in the yield curve, potential capital appreciation due to factors like India's inclusion in emerging market bond indices, and the mean reversion of yields.

Insights from Bajaj Finserv Asset Management

Ganesh Mohan, CEO of Bajaj Finserv Asset Management, highlighted the value proposition of the Banking and PSU Fund. He emphasised that the NFO allows investors to tap into fixed-income opportunities within the banking and PSU space while enjoying the benefits of professional fund management.

Nimesh Chandan, CIO of Bajaj Finserv Asset Management, highlighted the mutual fund's commitment to high credit quality. He mentioned that 80% of the fund's allocation will be in high-credit quality bonds of banks and PSU companies, with the remaining 20% in sovereign and other high-credit quality bonds.

Investment details and options

During the New Fund Offer period, the minimum application amount is ₹1,000 and multiples of ₹1 after that. The fund also offers Systematic Investment Plans (SIPs) with varying frequencies, providing flexibility to investors.

For investors considering investment beyond the NFO period, the minimum application amount for fresh purchase is also ₹1,000 and in multiples of ₹1 after that. It's essential to note that two-factor authentication will be applicable for subscription as well as redemption transactions in the units of the mutual fund.

Performance benchmark and expense ratio

The Bajaj Finserv Banking and PSU Fund is benchmarked against the NIFTY Banking and PSU Debt Index. This index reflects the performance of bonds and debt instruments issued by banking and public sector entities.

Regarding expenses, investors should be aware of the Annual Scheme Recurring Expenses. These expenses include various fees such as Investment Management and Advisory Fees, Registrar and Transfer Agents’ fees, marketing, selling costs, and more. The fund operates within the regulatory limits specified by SEBI for scheme recurring expenses.

Risk and asset allocation

The scheme carries a "Moderate Risk" profile, meaning that investors should be prepared for a certain level of risk, albeit not very high. The asset allocation strategy aims to strike a balance between safety, liquidity, and profitability. Investment decisions will be made based on factors such as prevailing interest rates, security quality, and market conditions.

Under normal circumstances, the asset allocation of the scheme is expected to include a significant percentage (80-100%) of debt and money market instruments issued by banks, PSUs, PFIs, and Municipal Bonds, which fall under the low to moderate risk category.

(Source: Fund document)

A look at returns of similar funds

(Source: Moneycontrol)

Conclusion: Should one invest?

The Bajaj Finserv Banking and PSU Fund offer investors a decent opportunity to diversify their fixed-income portfolios. It combines a focus on credit quality, performance potential, and market expertise, making it a compelling choice for those looking to explore opportunities in the ever-evolving investment landscape.

While this fund presents a potential for steady returns and capital appreciation, it's crucial to remember that all investments carry inherent risks. The "Moderate Risk" profile of this fund suggests that it is suitable for investors who understand and are willing to accept a certain level of risk. Therefore, potential investors should consult their financial advisors to determine whether this product aligns with their financial goals and risk tolerance.

(Edited by : Amrita)