IDFC Mutual Fund announced the launch of the IDFC US Treasury Bond 0 to 1 year Fund of Fund, an open-ended overseas Fund of Funds scheme tracking the ICE 0-1 Year US Treasury Securities Index constituents.
The scheme opened for public subscription on March 10, 2023, and will close on March 23, 2023, and will re-open for ongoing subscription and redemption within five business days from the date of allotment of units.
Q. What kind of mutual fund scheme is this?
This kind of open-ended index fund scheme aims to generate returns commensurate with the performance of the ICE 0-1 Year US Treasury Securities Index. The fund allows its investors much-needed exposure to US government debt, thus, carrying very little credit risk.
This fund involves less volatility as it involves exposure to securities with a maturity between zero and one year translates to low duration risk, i.e., impact due to interest rate sensitivity. This fund is best suited to investors seeking to create wealth in the long run. However, there is no assurance that the scheme’s investment objective will be realized.
Q. What is the main objective of investing in this fund?
The investment objective of the scheme is to provide long-term capital appreciation by passively investing in units/shares of overseas Index Funds and/or ETFs which track an index with US treasury securities in the 0-1-year maturity range as its constituents, subject to tracking error. The scheme does not guarantee/indicate any returns.
Q. How may one invest in this fund?
Investors can invest under the scheme with a minimum investment of ₹1000 per plan/option and in multiples of any amount thereafter. There is no upper limit for investment.
The scheme offers a Regular Plan and a Direct Plan. Both plans will have separate NAVs and a standard portfolio. The investors should note that the NAV of the Income Distribution cum capital withdrawal (IDCW) option and the Growth option will be different after the declaration of the IDCW under the scheme.
Under normal circumstances, the asset allocation of the scheme will be as follows:
| Instruments | Indicative Allocation (as % of total assets) | Risk Profile | |
| Minimum | Maximum | ||
| Units/shares of overseas Index Funds and/or ETFs which invest in securities of an index with US treasury securities in the 0-1-year maturity range as its constituents | 95% | 100% | Very High |
| Debt Securities, Money Market Instruments, and/or units of Debt and Liquid Schemes | 0% | 5% | Low to Moderate |
Q. How will the scheme benchmark its performance?
The performance of the scheme will be benchmarked against the ICE 0-1 Year US Treasury Securities Index. The composition of the aforesaid benchmark is such that, it is most suited for comparing the performance of the scheme. The trustees may change the benchmark in future if a benchmark better suited to the investment objective of the scheme is available, provided any change in benchmark will be subject to regulatory approval of SEBI.
Q. Are there any entry or exit loads to this scheme?
This scheme involves no “Entry Load”, which means that investors do not have to pay anything to park their earnings in this scheme. The “Exit Load” will be charged as
- 0.25% of applicable NAV - if the units are redeemed/switched out within one month from the date of allotment.
- Nil – if the units are redeemed/switched out after one month from the date of allotment.
All switches will be treated as redemption in the source scheme and subscription in the destination scheme, with the entry and exit load as may be applicable.
Q. Who will manage this scheme?
The overseas investments of the Scheme will be managed by Sreejith Balasubramanian. Investment by the scheme in domestic fixed-income securities will be managed by Brijesh Shah.
Q. Does the fund contain any inherent risk?
The scheme involves “Very High Risk” as per the details mentioned in the Scheme Information Document and is best suited to investors willing to understand that their principal will be subject to very high risk only. However, investors should consult their financial advisors if they doubt whether the product is suitable for them.
