Should you invest in Invesco India Medium Duration Fund?

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Invesco Mutual Fund has launched a new fund — Invesco India Medium Duration Fund. It is an open-ended medium-term debt fund that invests in securities with a macaulay duration of between 3 and 4 years. Macaulay duration refers to the weighted average term to maturity of a bond’s cash flows. Simply put it is the time an investor would require to get back all his invested money in the bond by way of periodic interest as well as principal repayments. The Invesco India Medium Duration Fund seeks to create income through the investment in debt and money market instruments. The fund would be created after an analysis of liquidity, interest rate expectations, and the credit situation.

Over 75% – 85% of exposure will be to ‘AAA’ rated corporate and government bonds (G-Secs). To maximise portfolio yield, the fund will invest between 15% and 25% of net assets in extremely selective ‘AA’ category corporate bonds, selecting such issuers using its in-house proprietary credit assessment approach.

Additionally, the fund’s objective will be to discover issuers whose credit metrics are likely to improve. Not only will these selected issuers provide the benefit of high accrual, but they will also provide the chance for the mark to market profits due to credit spread compression.

Management Views

The fund will not invest in debt with a rating of less than AA-. At all times, the scheme will seek to invest in securities that provide an optimal level of yields/returns while placing emphasis to its risk-reward profile.

“Fixed-income investments play a vital role in every investment portfolio; besides generating stable income, they also help in reducing overall portfolio risk as they are less volatile and have a low correlation with equity market returns,” said Saurabh Nanavati, Chief Executive Officer, Invesco Mutual Fund.

The management believes that the Reserve Bank of India (RBI) will continue to play a critical role in fostering economic growth through a variety of policies, including an accommodating monetary policy stance and a commitment to maintain systemic liquidity in surplus.

“We feel that up to a 5-year segment of the yield curve continues to provide attractive opportunity from a risk-reward perspective. Credit dispersion will continue with very high-quality credits may benefit from RBI’s benign liquidity policy, but the lower quality credits continuing to be avoided for the time being,” said Nanavati.

Things to look at

— Under SEBI’s stipulated Risk-o-Meter, this fund is suitable for the investors who prefer moderate risk seeks to generate income over the medium term. However, investors should consult their financial advisers to under the product is suitable for them or not.

— The minimum investment amount during the NFO is Rs 1,000/-, and subsequent investments will be in multiples of Rs 1/-. The minimum application amount for SIP investments is Rs 1,000/- per month, Rs 2,000/- per quarter, and in multiples of Re 1 afterward.

— There will be no exit load charge. The fund will be managed by Vikas Garg and Krishna Cheemalapati and will be benchmarked to the CRISIL Medium Term Debt Index.

— The direct plan will have a lower expense ratio i.e. 0.5% which excludes distribution expenses, commission for distribution of Units, etc. The regular plan will have a expense ratio of 1.45%.

— Subscriptions for the New Fund Offer (NFO) begin on June 29, 2021, and end on July 13, 2021.