SBI Long Term Advantage Fund (Series V) NFO reviewSBI Mutual Fund has launched a new fund offering (NFO) for the really long-term investors. SBI Long Term Advantage Fund (Series V), which is currently available for subscription, is a 10-year closed-ended fund that seeks to generate appreciation over a period of 10 years. The fund will invest in stocks of large, mid and small-cap companies.

The SBI website says: “A lot can change in 10 years. And we want you to make the most of it. All companies need time to grow and realise their potential in the market. The goal is to invest in companies with solid fundamentals and remain invested.”

Another feature of the fund is that it’s an Equity Linked Savings Scheme (ELSS) where you will be eligible for a tax deduction of up to Rs 1.5 lakh under Section 80C.

A closed-ended fund is a fund in which entry and exit can only be made within specific time-periods. Such funds remain open for subscription for a few weeks or months. Thereafter investors are locked-in until maturity. Investors can exit such fund by selling their units on a stock exchange however liquidity tends to be low.

So the only distinctive feature of this fund is that it has a 10-year lock-in. This is unlike the standard lock-in of three years on other ELSS funds.

Lock-in periods can sometimes help by stopping investors from jumping in and out of funds. However, there seems little reason for investors to have to accept such a long period of illiquidity. But if it helps someone if his funds are compulsorily locked, then it’s an ideal product. Invest and forget for next 10 years. 

LTCG Applicability

Following the introduction of the long-term capital gains tax on the units of equity mutual funds, your gains on SBI Long Term Advantage Fund will be subject to a 10% tax over and above Rs 1 lakh in the year of maturity. If the fund distributes any dividends, it will have to deduct tax at 10% on such dividends.

All-in-all the fund does not have any major stand-out feature besides this long lock-in.

Details:

NFO Period: 21st December 2017 to 20th March 2018

Minimum Amount: Rs 500 and multiples of Rs 500 thereafter

Plans: Growth and Dividend options with the facility of Payout & Transfer for the latter.

Fund Managers – R. Srinivasan

Benchmark – S&P BSE 500 Index

Note: Mutual fund investments are subject to market risks. Please read the scheme information and other related documents carefully before investing. Past performance of the schemes is neither an indicator nor a guarantee of future performance. The investor should make an independent evaluation or assessment of all the transactions with respect to his/her investment objective and risk appetite. Or investors should consult their financial advisers to understand whether the product is suitable for them or not.

Author
Neil Borate

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