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Home >Mutual Funds >News >IDFC Mutual Fund to launch target maturity gilt index funds. Key things to know

IDFC Mutual Fund on Wednesday announced the launch of two fixed-income funds - the IDFC Gilt 2027 Index Fund and the IDFC Gilt 2028 Index Fund. Both funds are open-ended target maturity index funds that will invest in government securities and treasury bills that constitute the CRISIL Gilt 2027 Index and Gilt 2028 Index respectively.

Target Maturity Funds have a defined maturity date, unlike regular open-end mutual funds that remain open indefinitely. Upon maturity, the net asset value of these funds will be paid back to unitholders.

IDFC’s Gilt Index Funds will invest only in sovereign-rated instruments - which are guaranteed by the Government of India - thereby reducing any credit risk. These funds will also steadily reduce the residual maturity of investments over the holding period, thereby reducing duration risk or the fund’s sensitivity to a change in interest rates.

Here are a few key things to know about the funds:

  • The IDFC Gilt 2027 Index Fund and IDFC Gilt 2028 Index Fund are ideally suited for investors seeking high-quality investments with a matching investment time horizon.
  • The funds are positioned with an aim to benefit from the current steep yield-curve, and we believe that 6 year and 7-year Government Securities are relatively attractive versus ultra-short tenor securities as well as corporate bonds when compared to average spreads over the last five years.
  • Gilts offer high liquidity, thereby lowering any impact cost.
  • Investors could also look at using these funds as part of a bar-bell strategy, with a combination of short-end investments combined with intermediate duration strategies like these gilt index funds to aim to optimise their yields.
  • Both funds offer simple, low-cost access to the highest quality debt investments for investors with an expectation of reasonable returns over the holding period.
  • The New Fund Offer (NFO) for the funds opens on March 12. And, they close on March 19.

Senior Fund Manager, IDFC AMC, Anurag Mittal said, "Both funds are open-ended and will offer a daily purchase and redemption facility. The minimum investment amount is 5,000, and there will be no exit load on redemptions."

He further added, "The IDFC Gilt 2027 Index Fund will mature on June 30, 2027, and the IDFC Gilt 2028 Index Fund will mature on April 05, 2028."

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