Mirae Asset Ultra Short Duration Fund NFO – Review and Analysis
Mirae Asset mutual fund is planning to launch ultra short duration fund that would open for subscription on September 28, 2020. Ultra Short duration fund invest in debt securities of 3 to 6 months. These funds are considered to be better than bank FD. Post Franklin debt mutual funds fiasco, investors are concerned about investing in debt mutual funds. In this situation, should you invest in such ultra short duration funds? In this article we would provide Mirae Asset Ultra Short Duration Fund NFO issue details, analysis, review and various risk factors associated with such funds.
Issue details of Mirae Asset Ultra Short Duration Fund (NFO)
An open ended ultra-short term debt scheme investing in instruments such that the Macaulay duration of the portfolio is between 3 months to 6 months. Here are the NFO issue details.
|Scheme reopens for continous purchase/sale||08-Oct-20|
|Scheme Plans||Direct and Regular
Growth and Dividend
|Minimum investment (Lumpsump)||Rs 5,000|
|Minimum investment (SIP)||Rs 500 / 6 months|
|NAV of the fund||Rs 10 during NFO period|
|Risk||Moderately Low Risk|
|Max Total expense Ratio (TER)||2.00%|
|Benchmark||NIFTY Ultra Short Duration Debt Index|
What is the investment objective of this MF scheme?
The investment objective of the scheme is to generate regular income and provide liquidity by investing primarily in a portfolio comprising of debt & money market instruments.
There is no assurance or guarantee that the investment objective of the scheme will be realized.
Who is eligible to invest in this mutual fund scheme?
The following can invest in this scheme.
1) Indian resident adult individuals, either singly or jointly.
2) Minors through Parents/Lawful Guardian.
3) Hindu Undivided Family (HUF) through its Karta.
4) Partnership Firms in the name of any one of the partners.
5) Proprietorship in the name of the sole proprietor.
6) Companies, Body Corporate, Societies, Association of Persons, Body of Individuals, Clubs and Public Sector Undertakings registered in India if authorized and permitted to invest under applicable laws and regulations.
8) Non-Resident Indians (NRIs) / Persons of Indian Origin (PIO) on full repatriation basis or on non-repatriation basis;
Complete list of eligible participants who can invest can be checked in the NFO prospectus.
Who is the Fund Manager of Mirae Asset Ultra Short Duration Fund?
Mr. Mahendra Kumar Jajoo is the fund manager for this mutual fund.
What is the allocation pattern in this mutual fund?
This fund investment pattern is as follows:
1) It invests 0% to 100% of investment in Debt and Money Market Instruments (including government securities) where Macaulay duration of the portfolio shall be between 3 months to 6 months. The risk profile in this segment is low to medium.
2) It would invest 0% to 10% in units issued by REITs and InvITs. The risk profile in this segment is medium to high.
Why to invest in the Mirae Asset Ultra Short Duration Fund?
Here are a few reasons to invest in such debt funds.
1) Ultra short duration funds would invest in instruments which would mature in 3 to 6 months. If you are looking for investing for short term of 3 to 6 months or more, you can invest in such funds.
2) Ultra short duration funds can provide 5% to 8% annualized returns though not guaranteed. If you are looking for returns higher than bank FDs, one can invest in such funds.
Some key risk factors you should consider before you invest in such funds
One should consider some of these risk factors / negative factors before investing.
1) Fixed income securities such as bonds, debentures and money market instruments run price-risk or interest-rate risk. Generally, when interest rates rise, prices of existing fixed income securities fall and when interest rates drop, such prices increase. The extent of fall or rise in the prices is a function of the existing coupon, days to maturity and the increase or decrease in the level of interest rates.
2) Since it invests in debt instruments, these would carry credit risk, default risk and liquidity risk. For investments in government securities, there is no credit risk.
3) The Scheme may invest in derivatives up to 50% of the net assets of the scheme for the purpose of hedging and portfolio balancing purposes and up to 10% in REITs and InvITs which are high risk.
4) You can refer complete risk factors of investing in this particular scheme in SID / KIM / NFO prospectus.
Performance of existing Ultra short duration funds in India
|Fund Name||3 Mth Ret (%)||6 Mth Ret (%)||1 Yr Ret (%)|
|PGIM India Ultra Short Term Fund*||1.0%||4.2%||9.0%|
|Aditya Birla Sun Life Savings Fund||1.6%||5.5%||7.6%|
|ICICI Prudential Ultra Short Term Fund||1.7%||4.8%||7.4%|
|HDFC Ultra Short Term Fund||1.3%||5.0%||6.9%|
|SBI Magnum Ultra Short Duration Fund||1.1%||4.5%||6.7%|
|Kotak Savings Fund Regular Plan||1.1%||4.4%||6.6%|
|IDFC Ultra Short Term Fund||0.9%||4.3%||6.5%|
|L&T Ultra Short Term Fund||0.9%||4.4%||6.3%|
|Nippon India Ultra Short Duration Fund||0.8%||3.0%||6.1%|
|UTI Ultra Short Term Fund||1.1%||3.8%||6.1%|
|Indiabulls Ultra Short Term Fund||0.8%||3.5%||6.0%|
|Axis Ultra Short Term Fund||1.1%||3.8%||6.0%|
*PGIM Short term fund gave 53% returns in last 1 year (abnormal case, we would anlayse this further as these are NOT regular returns) in Oct-2019, the performance is considered from Nov-19 to till date.
Should you invest in Mirae Asset Ultra Short Duration Fund NFO?
Mirae Asset Ultra Short Duration Fund invests in debt & money market instruments including government securities. Ultra short duration funds can provide higher returns compared to bank fixed deposits for a 3-6 months tenure. If you have surplus funds and need to utilize this for some purpose in the next 3 to 6 months or more (not sure about exact period), you can invest in such funds. One can expect 5% to 8% annualised returns, though not guaranteed.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully before investing.
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