Bandhan Long Duration Fund NFO: Objective, Benefits, Risks, and Suitability Explained

The Bandhan Asset Management Company is launching a new mutual fund offering in the debt category, the “Bandhan Long Duration Fund.” Let us begin by analyzing the New Fund Offer (NFO). 

Debt Fund

A debt fund is a mutual fund that predominantly invests in fixed-income securities such as government bonds, corporate bonds, debentures, treasury bills, etc. These are suitable for investors who are risk averse and want stable and consistent returns in their portfolio.

Long Duration Fund

This category of debt fund primarily invests in fixed-term securities with longer maturity, i.e., from 7 years to 20 years or more.

Benefits of Bond Investing

1.  The country’s current account deficit is decreasing, creating a stable interest rate environment and lowering the need to issue bonds to cover the deficit. 

2.  The government aims for a 4.5% fiscal deficit by FY 26, which suggests that there will be a decrease in the bond supply, which will be beneficial for the market.

3.  The country’s Core inflation remains below 4% as the government is effectively managing the food supply chain.

4.  An extra 23–25 billion in foreign investment is anticipated to enter the Indian bond market due to India’s inclusion in global indices.

5.  As global inflation eases, reduction in the rate of interest is expected.

Bandhan AMC

It was first founded as IDFC AMC in 2000, and by 2020, it was one of India’s top 10 AMCs in terms of AUM. In 2023, IDFC AMC was acquired by a group of institutions led by Bandhan Financial Holdings Limited. Bandhan ended up controlling 60% of the AMC, and thus rebranded it as Bandhan AMC. 

The stakeholders include Chrys Capital (20%) and Singapore’s sovereign wealth fund, GIC (20%). 

Read Also: What is NFO? Features, Types, & How to Invest in It

Bandhan Long Duration Fund

Bandhan Asset Management Company is coming up with a new fund offering named “Bandhan Long Duration Fund” which will open for subscription on 5^th March 2024 and close on 18^th March 2024.

Investment Objective

The company intends to diversify its portfolio into debt and money market securities in such a manner that the Macaulay duration of the fund is greater than 7 years. Thus, it intends to generate an optimum return over the long run.

Key Points

Date of Issue	5th March 2024
Closing Date	18th March 2024
Category	Debt
Sub-category	Long Duration
Plan	Regular and Direct
Options	Growth and Income Distribution Cum Capital Withdrawal (IDCW)
Minimum Purchase Amount	INR 1000
Exit Load	0%
Benchmark	Nifty Long Duration Debt Index A-III.

Fund Manager

Mr. Gautam Kaul, the senior fund manager of this fund, would supervise the fixed-income fund. Having managed over 27000 crores of assets using both active and passive techniques, he has a solid grasp of the fixed income securities market. 

He worked for Edelweiss Asset Management Company before joining Bandhan Mutual Fund and received his MBA and B.Com. degrees from the University of Pune, where he focused on accounting and finance. 

Benefits and Risks 

Similar to any other NFO, the Bandhan Long Duration Fund NFO also holds its definite set of advantages and risks. Below mentioned are some of the key advantages and risks involved. 

Benefits 

1.  High-quality debt instruments with the lowest credit risk will be the fund’s primary investment focus. Thus making it suitable for risk-averse investors. 

2.  Fund management will investigate opportunities in bonds issued by governments and corporations with maturities longer than seven years. Hence, long-term investors would benefit from this fund. 

3.  The fund manager of the Bandhan Long Duration Fund has managed fixed-income assets for over 20 years. Hence, the investors would benefit greatly from the manager’s extensive work experience.  

Risks

1.  The fund needs to maintain a minimum duration of 7 years which will limit its flexibility in case of any adverse situation.

2.  Putting money into a long-term debt fund will yield smaller returns. You won’t have the chance to earn larger gains if the stock market experiences a bull run. 

Suitability

1.  Investors who are looking for higher returns in debt funds.

2.  Investors who are looking for consistent returns.

3.  Investors who want to reduce the risk associated with reinvestment by maturing their portfolio. 

4.  Retired investors who can’t take on the risk associated with equities need a systematic withdrawal strategy to provide them with a steady income.

Did you know? 

After April 1, 2023, debt funds will no longer enjoy indexation benefits and thus will be taxed at applicable slab rates. 

Read Also: Bandhan Bank Case Study: Business Model, Financial Statement, SWOT Analysis

Conclusion

In summary, long-term debt funds are a solid option for investors who want a consistent return without taking on too much risk and are wary of market fluctuations. After carefully assessing the risk involved, one can invest in this fund based on their investing horizon and risk tolerance.  

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Disclaimer: The securities, funds, and strategies mentioned in this blog are purely for informational purposes and are not recommendations.