ITI Mutual Fund Launches Dynamic Bond Fund NFO

For a dynamic bond fund, ITI Mutual Fund launched a new fund offer that is likely to invest in debt and money market avenues. On July 9, NFO will close, and the bond fund is expected to be benchmarked against Crisil Dynamic Debt Index; and it is the 13th fund launch by the fund house, which started operations back in April 2019.

The main aim of the mutual fund is to maximize returns through the active management of portfolios featuring debt and money market avenues, and the fund would follow some technique that is structured in a way that offers investors the benefit of dynamic fund management through flexible asset allocation and of course active duration management. 

Dynamic Bond Funds are mutual funds that primarily invest across various duration or tenure of investment avenues. If one investor is looking for all season’s debt fund, active bond funds could be ideal for them. 

Schemes that have been already launched:

  • ITI Balanced Advantage Fund
  • ITI Small Cap Fund
  • ITI Banking and PSU Debt Fund
  • ITI Large Cap Fund
  • ITI Mid Cap Fund
  • ITI Ultra Short Duration Fund
  • ITI Value Fund
  • ITI Multi-Cap Fund
  • ITI Long Term Equity Fund (ELSS- Tax Saving Fund)
  • ITI Arbitrage Fund
  • ITI Liquid Fund

What should investors know about ITI dynamic bond fund?

The main agenda of the fund is to make the most of the returns through the active management of portfolios comprising debt and money market instruments, and the fund is likely to follow a strategy that is structured in a manner that mainly offers investors the perks of dynamic fund management through flexible asset allocation and active duration management.

Dynamic bond funds are the best bet for investors who may find it challenging to judge the interest rate movement. They would help investors reduce interest rate risk as they offer flexibility to alter the portfolio maturity as per the interest rate scenario in the stock market curses. 

George Heber Joseph, chief executive officer, and chief investment officer, ITI Mutual Fund, announced that with  ITI Dynamic Bond Fund, the company seeks to address the needs of investors who are looking for an all-season investment that aims to provide steady returns by investing in debt and money market vehicles. Vikrant Mehta will manage the scheme as per the fund house; the majority of investments will be in AAA or A1+ or equivalent rated securities. 

Reasons to invest in  ITI Dynamic Bond Fund:

  • This Dynamic Bond Fund would invest in securities that mature across different durations as one might be a short-term investor or medium-term investor, or long-term investor but they need to know investing in this fund is like investing in all season’s debt fund.
  • Historically, these funds have provided 7% to 10% annualized returns in the last 3-10 years though not guaranteed. Therefore, if one is looking for higher returns than bank FDs, they can invest in such funds without any second thoughts.

Factors to consider when investing in such funds:

  • This fund invests in debt instruments across tenures. As a result, such debt instruments carry different risks, and scheme risks might increase or decrease depending on the investment pattern.
  • The fund is also likely to invest in debt instruments that mostly have interest rate risks, reinvestment risks, spread risks, liquidity risks, credit risks, default risks, etc.
  • This fund mainly invests in fixed income derivatives where there is some element of risk present without a doubt.
  • One can refer to complete risk factors of investing in this scheme in SID / KIM.

Should one invest in ITI bond funds?

UTI Dynamic Bond Fund (New Fund Offer) is likely to invest in debt instruments across various durations, and it is all about some season fund. It mainly invests in corporate debt instruments, fixed income derivatives, etc., which are mostly are high risk. Dynamic bond funds mainly invest across durations and are perfect for investors who wish to invest for the medium to long term, while moderate risk investors can invest in this fund for a medium to a long time of at least 3 to 10 years.

The investors need to know that returns from FDs are taxed as per investor’s slab charges, whereas short-term capital good points from debt schemes are taxed as per slab charges, long-term capital good points are taxed at 20% with indexation profit. Investors need to understand that when compared to FDs, which are said to have low danger, dynamic bond funds include reasonable risk so they can consider investing here without any second thoughts. 

How much can one invest in ITI funds?

Ideally, investors can invest ₹5,000 in multiples of ₹1, after that, as it is the minimum application amount for the NFO. Additionally, there is not likely to be any entry or exit load to the scheme because there are already at least 20 dynamic bond funds available out there in the market. Over the past year, these funds have delivered an average return of 4.77%; on the flip side, three-year returns stand at 7.63%, 5-year at 7.14%, and 10-year at 8.30%.

When compared to State Bank of India’s fixed deposits (FDs) have delivered a return of 5.1% over the past year, 6.7% on a three-year basis, so investors need to keep in mind that compared with FDs, which are expected to have low risk the dynamic bond funds come with moderate risk.