Name of new fund offer (NFO)
Canara Robeco InDiGo Fund
What is it about?
It is a hybrid fund that aims to invest in debt instruments and gold. While the debt instruments would, typically, carry an average modified duration (a variation of bond’s maturity; it measures a bond’s sensitivity to changes in interest rates) of up to a year, it will invest in gold exchange-traded funds (ETFs).
Although it will invest at least 65% of its corpus in debt instruments, it aims to reduce volatility by restricting the modified duration of its debt portfolio to up to a year. In other words, most of its underlying debt investments would mature in around a year. The lower the fund’s modified duration, lower is the fund’s volatility. By restricting its portfolio’s modified duration, it aims to earn a steady income from its debt investments and a kicker in returns from gold. The fund works almost like a typical monthly income plan (MIP), except that equities will be replaced by gold.
While MIPs that invest in equity can actively manage in volatile markets, this NFO’s entire kicker in returns will hinge on gold. It can bring down its gold exposure down to 10%.
MONEY MATTERS TAKE
The NFO joins the growing list of multi-asset funds. The fund will return somewhere between a bond fund and an MIP over the long run, which is 10-12%, but would depend on the movement of gold prices. However, if you wish to have gold in your portfolio, it’s best to invest in gold ETFs. The MF comes with a good track record in fixed income management, but there’s no pressing reason to go for the NFO as it has no track record. Instead, opt for its existing MIP that comes with an established track record.