Nippon India’s new Income Plus Arbitrage Omni FoF brings together its high yielding Credit Risk Fund along with its arbitrage fund and a sliver of 5 yr benchmark gilt index fund to create a tax efficient way to pursue higher yields.
Asset allocation will remain largely stable at 40% arbitrage fund, 50% credit risk fund and 10% Nifty 5 yr benchmark G Sec ETF.
While many active FoFs in the Income + Arbitrage category have chosen to remain more short duration in nature, this new fund’s objective is to provide investors with higher visibility on the returns profile and potentially higher yields within a more tax efficient structure than a higher yielding fund would normally offer.
NIMF’s house view on interest rates is aligned with market expectations: 50 bps rate hike perhaps towards the end of FY27. However, since market is already pricing this in, Rajesh doesn’t expect the 10 yr G Sec yield to rise much above 7% - which is only 20 bps from the 6.80% levels we are at today.
Rate hike prospects therefore don’t have to mean running for safety of low duration funds.
Rajesh says a judicious mix of credit risk and arbitrage (which does not involve equity market risk) can perhaps deliver a smoother journey compared to equity savings funds (with 15% equity exposure), which some investors opt for in the quest for slightly better returns over time.