At a time when investors are looking for safer and liquid investment vehicles, small savings rates have fallen by as much as 140 basis points in the lockdown months. This has prompted many investors to look for alternatives, especially for the financial goals that are 2-3 years away.
In such a scenario, banking & PSU fund category has emerged as a suitable investment vehicle; banking & PSU fund is among the conservative debt fund categories, which offer relatively decent returns with reasonably high levels of safety.
Schemes in the banking & PSU fund category invest in debt instruments of banks, public sector companies and public financial institutions. Moreover, because of this investment universe, banking & PSU debt fund category is placed well for conservative investors. Moreover, it fits the bill for investors with moderate risk appetite as they can lower their credit risk while making the most from this opportunity with falling interest rates.
If you are looking for a good fund in this category, ABSL Banking & PSU Debt Fund is an apt choice.
The fund’s mandate is to invest in high credit quality instruments. In fact, the fund's exposure to AAA and sovereign rated papers is over 99% with most of the exposure concentrated in PSU instruments like REC, PFC, NABARD, HUDCO, NHAI, IRFC, and SIDBI. Meanwhile, exposure to individual non-PSU security is capped at less than 10%.
Given liquidity is a core factor in the current scenario, ABSL Banking & PSU fund is fully invested in AAA, government bonds and cash to ensure sufficient liquidity in the fund. The fund targets modified duration in range of 1-3.5 years. Further, a major portion of the portfolio is positioned in instruments having maturity less than 3 years, protecting it from significant interest rate risk.
As on August end, modified duration of the fund stood at 2.96 years, average maturity at 3.81 years, yield to maturity at 5.51% and Macaulay duration at 3.19 years.
While debt funds witnessed multiple credit events in the last one year, the fund’s 1-year return as on September 7 stood at 10.8%. In fact, the fund has consistently outperformed the benchmark in 1-year, 3-year, 5-year, 7-year and 10-year horizon, shows ValueResearch.com.
The fund is suitable for investors looking to park money for over 18 months.
