NFO review: SBI Dual Advantage Fund Series XXVII, a hybrid fund approachSBI Dual Advantage Fund Series XXVII (Series 27) will invest primarily in fixed income securities maturing on or before the maturity date of the scheme. The tenure of the scheme is 1111 days or slightly more than three years meaning that it will act as a short-term bond fund for its debt component.

The scheme will also have a small equity component. This is where the ‘dual advantage’ name comes from – debt and equity. It will be benchmarked to the CRISIL Hybrid (85:15) Index. This Index is a blend of S&P BSE 200 (15%) and CRISIL Composite Bond Index (85%).

What it’s about?

The scheme’s debt allocation can go from 65% to 95% and its equity allocation can go from 5% to 35%. It can also place up to 10% of its corpus in money market (debt) instruments. The scheme will not invest in real estate or airlines.

It will be managed jointly by two fund managers – Rajiv Radhakrishnan and Ruchit Mehta. Rajiv Radhakrishnan, who has been with SBI Mutual Fund since 2008, was previously with UTI Mutual Fund. He has over eight years of experience in managing fixed income funds. Radhakrishnan also manages other SBI funds such as SBI Magnum Insta Cash Fund, SBI Short Term Debt Fund and SBI Ultra Short-term debt fund. Ruchit Mehta has 12 years experience in the industry as a research analyst. He manages the equity component of funds such as SBI Magnum Monthly Income Plan and SBI Regular Savings Fund.

RupeeIQ Take

SBI Dual Advantage Fund is being launched in a scenario of rising interest rates. This may cause the fund to ‘lose out’ on higher interest rates in the coming months and years. The loss isn’t likely to come from ‘mark-to-market’ losses in the fund because the fund will align the length of its debt securities with its own tenure. However, there is an opportunity cost of being locked into lower interest rates than the prevailing ones.

The equity portion’s performance will depend on both the fund manager’s skill and how the market performs but given its relatively minor role in the fund, will not affect returns a great deal.

Closed-ended funds are a good idea if you do not trust yourself to move in and out of funds on impulse. They also protect the fund manager from sudden redemptions and hence can result in more efficient management. Whether these factors outweigh the negatives mentioned above is a choice you have to make.

Key Details

Tenure: 1111 days (Slightly more than three years)

Benchmark: CRISIL Hybrid (85:15) Index

Options: Growth, Dividend Payout and Dividend Transfer (In this option the dividend can be automatically moved to an open-ended scheme of SBI Mutual Fund)

Fund Managers: Rajiv Radhakrishnan and Ruchit Mehta

Minimum Investment: Rs 5,000

NFO Period: 5th March to 16th March 2018

Author
Neil Borate

Neil Borate is Deputy Editor, RupeeIQ. He can be contacted at neil@rupeeiq.com.