DSP Investment Managers recently announced the launch of DSP Nifty SDL Plus G-Sec Jun 2028 30:70 Index Fund. It is an open-ended target maturity fund (TMF), which will mature after about six years in June 2028.
The portfolio will give exposure solely to sovereign securities in the ratio of 70:30 between government securities (G-Sec) and state development loans (SDLs). This will align with Nifty SDL Plus G - Sec Jun 2028 30:70 Index.
The portfolio has dual filters to select state loans. Apart from applying a liquidity filter, there is a quality filter of low leverage. This quality filter is based on each state’s GDP in proportion to its total liabilities and only the top ten states which have the best quality scores are selected.
The portfolio will have a combination of highly liquid G-Secs and a selective list of SDLs with low leverage and high liquidity, all which are maturing during the 12-month period ending 30 June 2028.
The fund opened for subscription on March 11, and will close on March 17.
About the index: Nifty SDL Plus G-Sec 2028 30:70 index seeks to measure the performance of portfolio of state development loans and government securities maturing during the twelve-month period ending June 30, 2028.
Average statistics of constituents of index
As highlighted in the table above, there are 14 constituents in the index including the governments of Maharashtra, Gujarat, Karnataka, Telangana, Chhattisgarh, Madhya Pradesh, Tamil Nadu, Haryana, UP, Bihar, and of course — the Government of India.
The index is rebalanced on an annual basis and the weight of each state/ UT is capped at 15 percent.
As per the asset management company, the fund offers investors the potential of relatively stable and predictable returns.
Investors who subscribe during the new fund offer and remain invested till the defined maturity can get a total of seven years of indexation benefit.
The spreads between G-Sec and state development loans is amongst the lowest. At such low spreads, it is reasonable to have more investment in G-Secs than SDLs, given the relatively safer risk profiles of G-Secs.
“We are of the view that the yield curve’s rise is steep till 2028, and after that its rise is relatively less. Since the annual spreads increase till 2028 and then flatten, the six-year point is the attractive point for a predictable passive strategy,” says Sandeep Yadav, head-fixed income, DSP Investment Managers.