Edelweiss CRISIL IBX 50:50 Gilt Plus SDL Short Term Index Fund – Should you invest in this NFO?

Edelweiss MF has launched Short Term Index Fund NFO which would open for subscription on 27th February, 2023. This passive fund would invest in the index that has diversified portfolio of Indian Govt bonds and SDLs.  Should you invest in Edelweiss CRISIL IBX 50:50 Gilt Plus SDL Short Term Index Fund NFO? What are the various risk factors associated with such funds?.

Also Read: 5 Mutual Funds with Highest SIP in last 20 years

What is special about Edelweiss CRISIL IBX 50:50 Gilt Plus SDL Short Term Index Fund?

This is an index fund which replicates the Crisil Ibx 50:50 Gilt plus SDL short term index. This index consists of Indian Govt Bonds (IGB) 50% and State Development Loans (SDL’s) 50%.

The underlying index securities duration is between 1 to 5 years which further classified into the bands of 1-2 years, 2-3 years, 3-4 years and 4-5 years. The average maturity duration is 2.63 years.

This index would be rebalanced every quarter on the first business day of the month.

The Yield to Maturity (YTM) indicates 7.3% which can be considered as a benchmark and the actual yield could be higher or lower post fund management expenses.

Below is the list of index constituents.

Edelweiss CRISIL IBX 50-50 Gilt Plus SDL Short Term Index Fund - Index constitutents

Edelweiss CRISIL IBX 50:50 Gilt Plus SDL Short Term Index Fund – NFO Issue Details

Here are the issue details of this NFO.

Scheme Opens 27-Jan-23
Scheme Closes 10-Feb-23
Scheme reopens for continuous purchase/sale Within 5 working days
Minimum Lumpsum Rs 5,000
Minimum SIP Rs 500 for 12 months
NAV of the fund Rs 10 during NFO period
Entry Load Nil
Exit Load Nil
Risk Moderate
Benchmark CRISIL [IBX] 50:50 Gilt Plus SDL Short Duration Index
Fund Manager Mr. Dhawal Dalal
Max TER 1.00%

Edelweiss CRISIL IBX 50:50 Gilt Plus SDL Short Term Index Fund SID

What is the investment objective of this MF scheme?

The investment objective of the scheme is to replicate CRISIL IBX 50:50 Gilt Plus SDL Short Duration Index by investing in a diversified portfolio of Indian Government Bonds and SDLs, subject to tracking errors.

There is no assurance or guarantee that the investment objective of the scheme will be realized.

What is the allocation pattern in this mutual fund?

This fund invests pattern is as follows:

Type of instruments Min % Max % Risk Profile
Indian Government Bonds and SDLs representing CRISIL IBX
50:50 Gilt Plus SDL Short Term Index
95% 100% Low to medium
Money Market Instruments 0% 5% Low

How the Index Performance can be compared to active debt funds?

As per the brochure, below is the performance comparison between this index fund vs. other active debt fund categories.

Edelweiss CRISIL IBX 50-50 Gilt Plus SDL Short Term Index Fund - Index performance comparison to other debt fund cateogories

Why to invest in Edelweiss CRISIL IBX 50:50 Gilt Plus SDL Short Term Index Fund?

Here are a few reasons to invest in such mutual fund schemes.

1) The Scheme will predominantly invest in a mix of Indian Government Bonds (IGBs) and State Development Loans (SDLs) with durations ranging between 1-5 years. There has low or almost zero default risk.

2) This is a simple index fund to choose compared to several active debt funds available in the market.

3) Since this fund invests in constituents of the index, there is no bias towards any specific instruments.

4) Since this is an index fund, it comes with low cost.

Risk Factors of investing in such index funds

One should consider some of these risk factors / negative factors before investing.

1) Investment in govt bonds like other debt instruments have price and interest rate risk. When interest rate rises, the prices of bonds fall and vice versa.

2) Even though SDL market is relatively liquid, there is market liquidity risk with fixed rate SDLs compared to corporate bonds. Many occasions there is high volatility leading to trading with low volumes.

3) The index YTM indicates 7.19% after expense ratio. However, in reality the actual returns could be lower after considering tracking error and interest rate volatility.

4) You can refer complete risk factors by going through the scheme related documents.

Also Read: Which mutual funds gave highest SIP returns in last 10 years?

Edelweiss CRISIL IBX 50:50 Gilt Plus SDL Short Term Index Fund – Should you invest in this NFO?

Edelweiss CRISIL IBX 50:50 Gilt Plus SDL Short Term Index Fund is a passive fund that invests in an index which has Indian Govt Bonds and State Development Loans. This index has low default risk. The yield to maturity (YTM) indicates 7.19% post expense ratio.

On the other side, there is interest rate volatility in this index fund. The YTM is benchmark and can fluctuate with interest rate volatility. Investors also might get confused where fund name states short term index fund, but the investment objective states “This product suitable for investors who are seeing income over the long term”. This is for investors who want to invest for 1 to 5 year timeframe. This is not an alternative to bank FD as current bank FDs offer similar or higher returns.

If you are looking for short term investments beyond bank FDs and want to avoid default risks, you can consider such funds.

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Suresh KP

2 comments

  • rasheed

    Suresh Sir, Is this good for tax saving,
    For example, if i have done FD for 6 months i get taxed on interest
    If i invest in this i can redeem at any time i can based on need? please suggest

    • You would not get any tax benefits of investing in this fund for either 80c or compared to a FD. Any returns from such funds < 36 months are categorised as short term capital gains and you need to pay STCG tax i.e. would be added to your income and you need to pay income tax based on your current income tax slab.

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