Aditya Birla Sun Life Mutual Fund on October 16, 2023 launched two new funds – Aditya Birla Sun Life US Treasury 1-3 Year Bond ETF Fund of Funds and Aditya Birla Sun Life US Treasury 3-10 Year Bond ETF Fund of Funds.
These are open-ended funds of funds that will invest in units of exchange-traded funds (ETFs) focusing on US Treasury Bonds with maturities of 1-3 years and 3-10 years, respectively.
The new fund offers (NFOs) of the two funds opened for subscription on October 16, 2023 and will close on October 30, 2023. The minimum application amount for both schemes is Rs. 100 and in multiples of Re. 1 during the NFO period. The benchmark index for the two schemes are Bloomberg US Treasury 1-3 year index and Bloomberg US Treasury 3-10 year index, respectively.
Aditya Birla Sun Life Mutual Fund said in a press statement that with the US Fed funds rate at a multi-decade high and with the potential for rate cuts in 2024 looming ahead, there is an attractive opportunity to invest in US government grade debt.
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The investment in grade debt securities will provide investors with improved diversification opportunities, such as currency exposure, hedge against risk and geographical exposure by diversifying into US sovereign securities. US Treasuries also offer a good opportunity to build USD assets through stability and by way of attractive yield, it said.
“The difference between India and US sovereign rates at a decadal low also provides a great opportunity to invest in US treasuries,” it added.
The asset allocation will be 95-100 per cent in respective US Treasury Bonds of respective maturity. The rest, if any, will be in debt and money market instruments, including Tri Party Repo, government securities (G-secs) and cash and cash equivalent.
According to Aditya Birla Asset Management Company (AMC) the Aditya Birla Sun Life US Treasury 1-3 Year Bond ETFs Fund of Funds is suitable for investors with a shorter investment horizon and who are relatively risk averse. The benefits include higher absolute yield, lower volatility and duration risk and an opportunity to earn capital gains.
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The Aditya Birla Sun Life US Treasury 3-10 Year Bond ETFs Fund of Funds, on the other hand, is suitable for investors with long term investment horizon and who have a higher risk profile. The benefits include locking in higher yield for long-term, adding duration to portfolio and an opportunity to earn capital gains, it said.
A. Balasubramanian, managing director and CEO, Aditya Birla Sun Life AMC said: “Our new passive offerings present an opportunity for investors to potentially earn higher returns, gain currency diversity, and access a trusted treasury market. It enables the investor to tap into the unique opportunity arising from a temporary yield curve dislocation in one of world’s largest debt markets.”