Trust MF has launched Short Term Fund (NFO) that has opened for subscription now. Short Term Fund invest in debt securities which matures for short term of 1 to 3 years. These funds are considered to be better than bank fixed deposits. Post Franklin debt mutual funds fiasco, investors are concerned about investing in debt mutual funds. In this situation, should you invest in such Short Term Debt Funds? In this article we would provide details of TrustMF Short Term Fund, various risk factors and provide 360 review on this NFO.
Trust MF Short Term Fund – NFO Issue Details
This is an open-ended short-term debt fund investing in instruments such that the Macaulay duration of the portfolio is between 1 year to 3 years. Here are the NFO issue details.
|Scheme reopens for continuous purchase/sale||Within 5 days from initial NFO close date|
|Minimum Lumpsum||Rs 1,000|
|Minimum SIP||Rs 1,000 for 6 months|
|NAV of the fund||Rs 10 during NFO period|
|Risk||Low to Moderate|
|Benchmark||CRISIL Short Term Bond Fund Index|
What is the investment objective of this MF scheme?
It is an open-ended short-term debt scheme investing in instruments such that the Macaulay duration of the portfolio is between 1 to 3 years.
The scheme objective is to will endeavor to generate stable returns for investors with a short-term investment horizon by investing in debt and money market instruments.
There is no assurance or guarantee that the investment objective of the scheme will be realised.
What is the allocation pattern in this mutual fund?
This fund investment pattern is as follows:
|Type of instruments||Min %||Max %||Risk Profile|
|Debt Securities & Money Market Instruments||0%||100%||Low to Medium|
|Units issued by REITs and InvITs||0%||10%||Medium to High|
Back Testing with Model Portfolio
This fund has back tested with model portfolio with last 5 years data, where it could see the rolling returns between 4% to 14.8% if held for 6 months period and 4% to 11.84% if held for 12 months period.
Why to invest in the TrustMF Short Term Fund?
Here are a few reasons to invest in such debt funds.
1) This fund emphasizes on providing high quality portfolio by investing in AAA and sovereign securities. The unique and structured investment approach and LimitedACTIV methodology are adopted with CRISIL who is strategic partner.
2) This Short-Term Fund would invest in instruments which would mature in 1 year to 3 years. Good for investors who are looking to invest for this tenure.
3) This MF has analysed the model portfolio and back tested for rolling returns for 5 years. This model portfolio is designed by AMC, but back tested with CRISIL. This model portfolio has consistently delivered annualized returns of 4% (Min) to 11.4% (Max) if held for 12 months. This fund delivered average rolling returns of 8%. This is despite the volatility in interest rates and credit markets.
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) This fund invests in fixed income securities, bonds, debentures and money market instruments which have 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.
3) You can refer complete risk factors of investing in this scheme in SID / KIM / NFO prospectus.
Performance of existing Short Term Funds in India
Here are performance of top 10 funds. Returns over 1 year are annualised.
|Scheme Name||1 Yr||2 Yrs||3 Yrs|
|HDFC Short Term Debt Fund||5.3%||8.5%||8.8%|
|Aditya Birla Sun Life Short Term Fund||6.1%||8.0%||8.5%|
|ICICI Prudential Short Term Fund||5.1%||8.2%||8.5%|
|Axis Short Term Fund||4.6%||7.9%||8.4%|
|IDFC Bond Fund – Short Term||4.3%||7.7%||8.3%|
|Nippon India Short Term Fund||5.7%||7.9%||8.2%|
|Kotak Bond Short Term Plan||4.2%||7.5%||8.2%|
|L&T Short Term Bond Fund||4.0%||7.5%||8.0%|
|SBI Short Term Debt Fund||3.9%||7.3%||7.9%|
|DSP Short Term Fund||4.2%||7.3%||7.9%|
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Should you invest in TrustMF Short Term Fund NFO?
Trust MF Short Term Fund invests in debt & money market instruments that mature in 1 to 3 years’ time frame. Short Term Funds can provide higher returns compared to bank fixed deposits for such tenure. This fund has back tested its portfolio with CRISIL and able to assess that it can provide rolling returns of 8% annualized returns. As indicated by us earlier, these funds can provide 6% to 9% annualized returns, though not guaranteed. Moderate risk investors can invest in this fund for 1 to 3 years’ time frame.
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