Conservative investors looking for better post tax returns than FDs have in the past invested in FMPs and then in target maturity funds. But they never really had a product that ticked all the 3 boxes –predictability, tax efficiency and liquidity.
The new Axis Income + Arbitrage Passive FoF aims to deliver all three requirements of conservative investors:
- Predictability through a roll down strategy on a portfolio of index ETFs that invest in 3-4 year financial sector bonds and 3 yr SDLs
- Tax efficiency through the Income + Arbitrage structure where upto 65% will be invested in these ETFs and at least 35% in arbitrage, thus qualifying for 12.5% LTCG for 2 yr + holdings
- Liquidity through an open ended fund structure
This new Income + Arbitrage Passive FoF ideally complements the fund house’s industry first open architecture active FoF in the same fund category, which invests dynamically across duration and/or accrual based funds from the top 10 debt fund houses, as dictated by market conditions.
Devang says the active version is a fund manager’s fund – an opportunities kind of fund – meant for investors who want a fund manager to nimbly move across the spectrum of fixed income opportunities in the quest for the best strategy at any point in the market.
The new passive version on the other hand is for conservative investors who are not seeking alpha opportunities but rather are looking for a solution that delivers better than FD returns on a post tax basis with low volatility and high predictability.
For HNIs and corporate investors who invested in FMPs and target maturity funds earlier, this new product is perhaps an ideal choice as it adds liquidity to predictability and tax efficiency.