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The fund has a target maturity date of September 30, 2026, and invests in a diverse portfolio of AAA-rated PSU Bonds and SDLs that mature on or before the scheme's maturity date.

There has been a spurt in the growth when it comes to passive investments as the mutual fund houses have launched over five index funds, mostly tracking different Nifty indexes. Aditya Birla Sun Life AMC joined this trend by launching Aditya Birla Sun Life Nifty SDL Plus PSU Bond Sep 2026 60:40 Index Fund. The scheme is an open-ended scheme tracking the Nifty SDL Plus PSU Bond Sep 2026 60:40 Index.

As per the Ace mutual fund data, in the last one year under this category of index funds, Motilal Oswal Nifty Smallcap 250 Index Fund, Sundaram Smart NIFTY 100 Eq Weight Fund, and Principal Nifty 100 Equal Weight Fund has given a return of over 69%.

That said, this category falls under the ‘Others’ Index fund as per Ace mutual fund data. Apart from this, there are four different categories of Index funds that include ETF-Index funds, Index funds-Nifty, Index funds-Nifty next 50, and last Index funds-Sensex.

Investment objective

The fund has a target maturity date of September 30, 2026, and invests in a diverse portfolio of AAA-rated PSU Bonds and SDLs that mature on or before the scheme’s maturity date.

As an index fund, it will replicate the performance of the Nifty SDL Plus PSU Bond Sep 2026 60:40 Index. The portfolio index will be composed of 60% SDLs issued by the top ten states/Union Territories and 40% AAA-rated PSU bonds issued by the top ten states/Union Territories, as determined by credit quality and liquidity scores.

It will seek to hold bonds until they mature with the goal of generating stable and predictable returns. Following that, the index will undergo a quarterly rebalance and review of its constituents.

Management views

This index fund is Aditya Birla Sun Life Mutual Fund’s first foray into passive fixed income products. Additionally, the fund house has introduced three new passive funds thus far this fiscal year.

“The passive debt product combines the simplicity of traditional savings instruments with the predictability of returns, quality portfolio of state government bonds and AAA-rated PSU bonds, target maturity period and the flexibility of an open-ended scheme, better liquidity and tax benefits. With yields becoming more attractive and inflation numbers cooling, investors’ real returns have gone up,” said A. Balasubramanian, MD & CEO, Aditya Birla Sun Life AMC.

A target maturity fund has a defined maturity date that corresponds to the maturity of the bonds it owns. This enables these funds to deliver predictable and stable returns. At maturity, an investor will receive a return on their investment.

What should investors know?

-The scheme aims to generate income over the longer term.

– The scheme’s overall expense ratio, including investment and advisory fees, shall not exceed 1% of daily net assets per Sebi.

-It falls under the ‘Moderate’ risk category, and investors should consult their advisors to check the product suitability.

-Minimum of Rs 500 and in multiples of Re 1 thereafter.

– Long-term capital gains in debt mutual funds held for more than three years are taxed at a rate of 20% post-indexation.

Because it is a passively managed Index Fund, it is possible to buy and sell at any moment during the fund’s duration through the AMC.

-Indexation enables an investor to align the purchase price of an investment with inflation, so increasing its tax efficiency.