What are target maturity mutual funds? SBI MF launches three funds

SBI Mutual Fund (MF) has announced the launch of three target maturity funds (TMFs), further expanding its offerings in the passive segment. The funds are SBI CRISIL IBX Gilt Index – June 2036 Fund, SBI CRISIL IBX Gilt Index – April 2029 Fund, and SBI CRISIL IBX SDL Index – September 2027 Fund.

These funds are open-ended target maturities index funds investing in constituents of the CRISIL IBX Gilt Index – June 2036 Index, the CRISIL IBX Gilt Index – April 2029 Index, and the CRISIL IBX SDL Index – September 2027 Index.

What are target maturity funds?

Target maturity funds are a category in debt mutual funds that have a specific maturity date that invest in the bonds that are included in the underlying index, and hold it till maturity to later distribute the proceeds to the investors. These funds predominantly invest in higher rated instruments such as Government Securities, AAA rated securities and PSU Bonds.

“TMFs can be a good fit for investors in the current rising interest rate scenario as these funds are giving investors the opportunity to invest at current market yields. Further, if the investor stays invested till the maturity of the fund, it can also help in managing the risk associated with change in interest rates cycle. As compared to traditional investment avenues, these funds have higher liquidity as investors have the flexibility to enter and exit the scheme any time. These funds offer tax efficient returns because of indexation benefit offered by debt funds,” said D P Singh, Deputy MD & Chief Business Officer, SBI Mutual Fund.

SBI MF said that The schemes would invest a minimum of 95% and a maximum of 100% of its assets in securities covered by the CRISIL IBX Gilt Index – June 2036 / CRISIL IBX Gilt Index – April 2029 / CRISIL IBX SDL Index – September 2027. It may also invest up to 5% of its assets in government securities maturing on or before the maturity date of the Scheme, money market instruments including Triparty Repo, and units of liquid mutual funds. 

The investment objective of the scheme is to provide returns that closely correspond to the total returns of the securities as represented by the underlying index, subject to tracking error, the release by SBI MF said. Dinesh Ahuja is the fund manager of these schemes.

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