It is suggested that the portfolio be split 50/50 between highly liquid State Development Loans (SDLs) from states with strong financial positions and high liquidity and highly liquid Government Securities (G-Sec).
The DSP CRISIL SDL Plus G – Sec Apr 2033 50:50 Index Fund, an open-ended target maturity index fund investing in the constituents of the CRISIL SDL Plus G-Sec Apr 2033 50:50 Index with maturity on April 25, 2033, was introduced by DSP Investment Managers. The subscription period for this new fund offer (NFO) began on January 10 and will last until January 19, 2023.
In a 50:50 split, the portfolio is proposed to be invested in highly liquid Government Securities (G-Sec) and State Development Loans (SDLs) from states with strong financial positions and high liquidity.
The portfolio has a distinctive layout with two filters for choosing SDLs. There is an additional Quality Filter of Low Leverage in addition to the Liquidity Filter. The top 5 States/UTs with the highest quality scores will be chosen, with each state receiving a 10% weighting based on each state’s GDP in relation to its total Liabilities.
DSP Investment Managers said in a statement that the proposed portfolio is, therefore, likely to include a combination of highly liquid G-Secs and a select list of SDLs with low leverage and high liquidity, all of which are maturing within the 12 months ending April 25, 2033.
The fund gives investors a bond-like structure with a set maturity designed to make maturity returns visible. In contrast to Fixed Maturity Plans, the open-ended system of the fund also permits continuous buying and selling of the fund (FMPs). If invested on or before March 31, 2023, it also provides tax efficiency through long-term capital gains taxation at a lower rate of 20 percent with 11 years of indexation benefits.
“The fund presents an excellent opportunity for a risk-averse investor since it will only invest in Government securities of the federal government and individual states maturing around 2033. In addition, interest rates will have significantly increased in 2022. The higher rates give investors a better starting point. DSP Investment Managers’ Head of Fixed Income, Sandeep Yadav, says.
The weighting for the split is as follows.
7.95% G-Sec 2032 – 25 per cent
7.26% G Sec 2032 – 25 per cent
Maharashtra, Gujarat, Karnataka, Assam, and Telangana state governments – 10 percent each.
The application fee must be at least Rs. 500 and in multiples of Rs. In multiples of Rs. 1, the minimum additional application amount will also be Rs. 500. No exit load exists.
The fund will provide investors with the benefit of a bond-like structure with a fixed maturity positioned to provide visibility of returns at maturity and the advantages of indexation of long-term capital gains, according to DSP Investment Managers.
“The fund’s open-ended structure also enables continuous buying and selling of the fund. In addition, according to the press release, if invested on or before March 31, 2023, it also provides tax efficiency through long-term capital gains taxation at a lower rate of 20% with 11 years of indexation benefits.
According to DSP Investment Managers, the scheme offers higher yields, low credit risk (sovereign securities), high liquidity (G-secs), and tax advantages with indexation benefits.
According to Sandeep Yadav, head of fixed income at DSP Investment Managers, “the fund offers a good opportunity for a risk-averse investor since it will only invest in government securities of the federal government and individual states maturing around 2033.” In addition, interest rates will have significantly increased in 2022. Therefore, the higher rates give investors a better place to start.