NFO review: SBI Corporate Bond Fund to invest mainly in AA+ rated bonds

The new issue would be open for subscription from 16 January 2019 to 29 January 2019

Priyanka Bharati Jan 17, 2019

Corporate Bond FundSBI Mutual Fund has floated new fund offer named SBI Corporate Bond Fund, an open-ended debt scheme predominantly investing in AA+ and above rated corporate bonds. The new issue will be open for subscription from 16 January 2019 to 29 January 2019. The fund aims to provide the investors an opportunity to predominantly invest in corporate bonds rated AA+ and above to generate additional spread on part of their debt investments from high quality corporate debt securities while maintaining moderate liquidity in the portfolio through investment in money market securities.

As per the corporate bond category mandate, this scheme will invest 80% to 100% of assets in Corporate Bonds rated AA+ and above only with low to medium risk profile. Remaining ~20% of assets will be invested in debt instruments other than above, central and state governments’ dated securities and money market instruments with low to medium risk profile. The fund may also have exposure to units of REITs and InVITs with medium to high risk profile, upto 10% of assets.

The fund will be co-managed by Rajeev Radhakrishnan, who has total experience of around 17 years in fund management, with around 10 years in fixed income funds management and dealing. He is managing several other debt funds at SBI Mutual Fund. Co-managing the fund with Radhakrishnan is Mohit Jain, who is the dedicated fund manager for managing overseas investments of the schemes of the fund which have a mandate to invest in overseas securities.

Corporate Bond Funds may be termed as open-ended FMPs. These funds typically follow accrual strategy. The 3-year category return, as per value research, as on date is 7.22%.

SBI Corporate Bond Fund is benchmarked against Nifty Corporate Bond Index.

Tax Treatment

Being a debt scheme, investment period less than 3 year is short term and so short-term capital gains tax is levied which is as per investors’ income tax slab. For holding period of more than three years, long term capital gains tax is applicable providing investors with indexation benefits.

Key Scheme Features

NFO Period 16 January, 2019 to 29 January, 2019
Type of Scheme An open-ended debt scheme predominantly investing in AA+ and above rated corporate bonds
Benchmark Nifty Corporate Bond Index
Min Application Amount Rs 5,000 and in multiples of Re. 1/- thereafter.
Plans and options Regular & Direct Plans Under which following Options are offered
-Dividend (Reinvestment, Payout & Transfer)(Monthly & Quarterly Frequency)
Exit Load
• For exit on or before 6 months from the date of allotment – 1.00%

• For exit after 6 months from the date of allotment – Nil

Risk Profile Moderate Risk
Investor Suitability This product is suitable for investors who are seeking
• Regular income for medium term
•Investment predominantly in corporate bond securities rated AA+ and above

RupeeIQ Take: Corporate bond funds are suitable for conservative investors who want to invest in a fund that has low interest rate risk and low credit risk. Investors can look at this fund for an investment tenure of two year and above.

Disclaimer: Please note that investors are requested to consult their financial, tax and other advisors before taking any investment decision.

Priyanka Bharati

Priyanka Bharati is a senior personal finance analyst with RupeeIQ. She can be reached on [email protected]

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