Kotak Mahindra Mutual Fund launched the Kotak All Weather Debt FoF Growth Direct Plan to generate long-term capital appreciation from a portfolio created by investing in debt-oriented mutual fund schemes of the company. This new fund was put on offer on October 28, 2022. Those interested can invest in it by November 10, 2022.
This new fund offer (NFO) involves putting money in debt schemes run by Kotak Mahindra Asset Management Company. Abhishek Bisen has been assigned to look after the working of this fund.
Fund objective
Unlike debt funds that invest money in bonds, government securities and fixed-income plans, this mutual fund will put money in debt schemes investing in such options.
There should be adequate allocation to the debt component in an investment portfolio to instil stability both in the short and long run. This is because debt funds carry less risk. Investors are also able to save on taxes owing to the indexation benefit. With so much volatility in the market due to macro factors such as the current geopolitical tensions, it makes sense to rest some money in debt instruments.
Should you invest in debt FoF?
Many investors inquire if it is better to invest in a debt fund or opt for a debt Fund of Fund (FoF) offer. Rajani Tandale, Product Head – Mutual Fund, 1finance.co.in says, “An FoF provides expert due diligence and acts as an investor’s proxy. Investors don’t have to stress about assessing the fund, monitoring market circumstances, or dealing with the hassle of switching from one fund to another in response to market fluctuations. Additionally, this offers a chance to lower the risk associated with investing in a single fund.”
For example, in a debt FoF during the rising rate scenario fund may invest in a liquid and ultra-short-term category of funds and as the market condition changes to the interest rate cut scenario the fund manager may switch to high-duration funds. Here investors can stay invested in only one fund that is FOF and the Fund manager will have a free hand to move funds from one scheme to another or invest in multiple funds as required.
Also, under an FoF scheme, the investors have to bear double expense charges, both the actual invested scheme’s and the underlying scheme’s expenses. The FOF fund managers will also not have any control over the portfolio underlying funds.
Debt fund or debt FoF?
Investors who have clarity on investing and rebalance their portfolio as and when required as per market situation can invest in a normal fund. This is because they need no hand-holding and know how to deftly move their investments from one option to another.
In contrast, FoF investments are recommended for those with less market understanding who want a diversified long-term investment choice with low risk and ready to pay higher expense fees. Again, it all depends on an individual’s financial goals.
