IDFC Corporate Bond Fund NFO – Should you invest in such risky bond?

IDFC Corporate Bond Fund NFOIDFC Corporate Bond Fund NFO – Should you invest in such risky bond?

IDFC Corporate Bond Fund New Fund Offer (NFO) would open for subscription on 28th December, 2015. Since this invests in corporate bonds, investors are thinking it is safe investment and expecting higher returns from this mutual fund scheme. IDFC Corporate Bond Fund scheme is aiming to invest in AAA rated bonds only. Should you invest in IDFC Corporate Bond Fund NFO? What risk factors should you consider before investing in this scheme?


Also Read: 10 Best Mutual Funds to invest in India for long term

Features of IDFC Corporate Bond Fund

  • This is open ended scheme.
  • NFO Opens on 28-Dec-2015 and closes on 11-Jan-16. It would reopen for subscription further from 13th January, 2016.
  • Minimum subscription is Rs 5,000 and Rs 1 multiple there-off
  • This mutual fund scheme plans to invest in AAA rated debt instruments.
  • Entry load is Nil.
  • If redeemed/switched within 3 months from the date of allotment, you need to pay 0.25% exit load.
  • Like any other mutual fund, this scheme is available in direct and regular plans as well as growth and dividend options.
  • This scheme is benchmarked to CRISIL Short Term Bond Fund Index.

What are the objectives of IDFC Corporate Bond Fund Scheme?

This mutual fund scheme aims to provide steady income and capital appreciation by investing in corporate debt instruments across maturities and ratings. This scheme pre-dominantly planning to invest in AAA rated corporate debt schemes. It aims to invest in 4-5 years maturity period schemes in initial period. It is planning to invest 80% to 100% in corporate debt schemes and 0-20% in money market instruments, treasury bills and cash management bills. There would not be any exposure to G Securities.

Who is eligible to invest in IDFC Corporate Bond Fund?

Residential Indians, partnership firms, corporates, Foreign portfolio investors etc., can invest in this scheme. NRI’s can also invest in this scheme on repatriation or non repatriation basis. Residents of Canada / US Persons cannot invest in this scheme.

Where exactly this IDFC Corporate Bond Fund Scheme invests?

It is planning to  invest in various debt schemes as indicated below.

  • Debt instruments including non convertible debentures issued by companies / institutions owned by State and Central Government where such instruments are not guaranteed by such Governments.
  • Debt instruments issued by private companies / public companies / banks / financial institutions, NCD’s, Strips, Notes, Debentures etc.,
  • Securitized Debt other than of foreign securitized debt.
  • Certificate of deposits (COD’s), commercial papers, bills at re-discounting.
  • Derivatives.
  • Permitted foreign debt securities.
  • Any other debt instruments.

Also Read: Best ways to invest lump sum in mutual fund schemes

IDFC Corporate Bond Fund NFO – Should you invest in such risky bond?

This mutual fund scheme aims to invest in AAA rated debt instruments. However, it is planning to invest in various debt instruments which are high risk and which are not guaranteed by either State or Central Government. We should not forget about incident of 2 debt mutual funds from JP Morgan Mutual funds which invested predominantly in Amtek debt instruments and due to ratings downgrade investors lost some money. SEBI has given direction to mutual fund houses to reduce exposure in private/public company debt instruments. Investors should know that this is high risk corporate bond fund scheme. Yes, I do agree that it can provide higher returns compared to other debt mutual fund scheme. If you are high risk investor, want to invest lump-sum and willing to invest for 4 to 5 years, you can invest in such mutual fund Scheme. Moderate to low risk investors should away from such schemes. They can invest in other short term to long term debt mutual fund schemes.

Readers, what is your view on this high risk corporate bond fund?

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IDFC Corporate Bond Fund NFO – Should you invest in such risky bond


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