Product crack: ICICI Prudential Constant Maturity Gilt Fund Read more at: http://www.livemint.com/Money/Ha4wIDxkC8A1jeVSfKCVFL/Product-crack-ICICI-Prudential-Constant-Maturity-Gilt-Fund.html?utm_source=copy

 






This is yet another new fund offer from ICICI Prudential Asset Management Co. Ltd, but this time it’s a scheme being added to its fixed income basket. ICICI Prudential Constant Maturity Gilt Fund is a debt fund with the mandate to invest only in government securities. It will be a passively managed, high duration fund that will help in taking forward investors’ interest rate view. Although the fund can invest in government

securities (G-secs) with maturity of 8-12 years, the fund manager plans to have a portfolio purely of 10-year G-secs. The idea is to give investors a way to access the benchmark security in a liquid and efficient manner to take advantage of any interest rate opportunities. What’s good The fund comes with a very focused and specific mandate of investing in G-secs with a maturity of around 10 years. Hence, the investor knows

exactly what the fund will invest in and the risk it carries. Given that it will be passively managed, the chances of the risk-return dynamics changing are low. Moreover, the passive management will keep transaction costs low. If the investor ends up holding the fund over a long period, the returns will be commensurate to the G-sec yield for that period. The fund manager, Rahul Goswami, comes with a good track record. He

expects that given the improvement in the current account deficit, fiscal deficit and the falling inflation expectations, the interest rate cycle may be about to turn positive. If this view plays out as expected, a high duration fund could do well. What’s not By virtue of the objective of holding an average maturity of around 10 years, the portfolio can be considered high risk. High duration funds typically will have higher volatility in

the daily net asset value (NAV). Investors should have a positive interest rate view to consider investing in

this. It works somewhat like an index as the fund manager does not intend to actively manage the duration or the type of security the portfolio will have. As a result, it means that you can’t use this fund as an investment if you want to manage your interest rate call in a dynamic manner. Mint Money take This is ideal for investors who want to take exposure to the most liquid part of the bond market in wake of the current interest rate

cycle. The pedigree of the fund house and experience of the fund manager works in favour and if your view on the rate cycle is positive, this fund offers a good proxy. Keep in mind though that the fund lies at the higher end of the risk spectrum and is meant only for informed investors who understand the risks of high duration.



If you are a fixed-income investor who looks for regular income from the category, then this may not be your pick. Read more at: http://www.livemint.com/Money/Ha4wIDxkC8A1jeVSfKCVFL/Product-crack-ICICI-Prudential-Constant-Maturity-Gilt-Fund.html?utm_source=copy


md.aquil alam
pgdm 3rd semester
iimt college of management
source.live mint