Debt allocation is an important component that helps diversify investments across asset classes to create a well-diversified portfolio. For investors looking to construct a fixed income investment portfolio, you can now consider investing in passively managed debt funds that also offer a low-cost and hassle-free option to investors.
While investing in debt funds, investors have the option to choose from actively managed debt funds and passively managed Debt Exchanged Traded Funds (ETFs) or Index Funds. Recently, the debt mutual funds in the target maturity segment are gaining tract and where the most significant retracement has occurred in the 5-year yields on the AAA and SDL curves.
Debt ETFs follow passive investment style with an aim to replicate an underlying index by investing in Debt securities comprising the index in similar proportion. Notably, several fund houses have come up with Debt-oriented new fund offerings with low credit risk, interest rate risk and a target maturity plan.
Target maturity debt ETFs are suitable option for investors looking to invest in debt funds that offer exposure to the fixed income space and investment in AAA rated government backed bonds and SDLs.
Kotak Mahindra Mutual Fund has launched Kotak Nifty AAA Bond Plus SDL Apr 2026 70:30 ETF. It is an open-ended Target Maturity Exchange Traded Fund replicating/tracking Nifty AAA Bond Plus SDL Apr 2026 70:30 Index. The scheme will replicate the index with investment proportion in the ratio of 70:30 and provide returns corresponding with the underlying index.
Table 1: Details of Kotak Nifty AAA Bond Plus SDL Apr 2026 70:30 ETF
| Type | An open-ended Target Maturity Exchange Traded Fund replicating/tracking Nifty AAA Bond Plus SDL Apr 2026 70:30 Index. | Category | Exchange Traded Fund |
| Investment Objective | The investment objective of the scheme is to replicate Nifty AAA Bond Plus SDL Apr 2026 70:30 Index by investing in bonds of issuers rated AAA and state development loans (SDL), subject to tracking errors. However, there is no assurance or guarantee that the investment objective of the scheme will be achieved. | ||
| Min. Investment | Rs 5,000 and in multiples of Re 1 thereafter. | Face Value | Rs 10/- per unit |
| Entry Load | Not Applicable | Exit Load | Nil |
| Fund Manager | Mr. Abhishek Bisen | Benchmark Index | Nifty AAA Bond Plus SDL Apr 2026 70:30 Index |
| Issue Opens | October 08, 2021 | Issue Closes | October 13, 2021 |
(Source: Scheme Information Document)
The investment strategy for Kotak Nifty AAA Bond Plus SDL Apr 2026 70:30 ETF will be as follows:
Kotak Nifty AAA Bond Plus SDL Apr 2026 70:30 ETF seeks to track investment results of Nifty AAA Bond Plus SDL Apr 2026 70:30 Index, subject to tracking errors. The scheme will aim to invest in constituents of the underlying index, which are AAA rated bonds issued by government owned entities, HFCs, NBFCs and Corporates & SDLs issued by States/UTs.
The scheme endeavours to follow buy and hold investment strategy in which debt instruments by AAA rated corporate borrowers & state development loans will be held until maturity, unless sold for meeting redemptions/rebalancing.
The scheme shall replicate the index completely. In case the scheme is not able to replicate the index, the Fund Manager may invest in other issuances within the limits specified and subject to conditions laid down by the SEBI circular dated November 29, 2019 as amended from time to time.
About the benchmark
Nifty AAA Bond Plus SDL Apr 2026 70:30 Index seeks to measure the performance of portfolio of AAA rated bonds issued by government owned entities, Housing Finance Companies (HFCs), Non-Banking Financial Companies (NBFCs) and Corporates and SDLs maturing during the twelve month period ending April 30, 2026.
The index is computed using the total return methodology including price return and coupon return. Index represents the performance of maturity-targeted segment of the PSU bond and SDL market and reviewed at the end of every calendar quarter.
The following is the list of constituents under the Nifty AAA Bond Plus SDL Apr 2026 70:30 Index as of September 28, 2021:
(Source: Scheme Information Document)
Under normal circumstances, the asset allocation will be as under:
Table 2: Asset Allocation for Kotak Nifty AAA Bond Plus SDL Apr 2026 70:30 ETF
| Instruments | Indicative Allocation (% of net assets) | Risk Profile | |
| Minimum | Maximum | High/Medium/Low | |
| Replication of Nifty AAA Bond Plus SDL Apr 2026 70:30 Index with deviations as allowed by SEBI | 95 | 100 | Low to Medium |
| Cash and debt/money market instruments | 0 | 5 | Low |
(Source: Scheme Information Document)
Who will manage Kotak Nifty AAA Bond Plus SDL Apr 2026 70:30 ETF?
Mr Abhishek Bisen will be the dedicated fund manager for this scheme.
Mr Abhishek Bisen is a Senior Vice President and Fund Manager at Kotak Mahindra Asset Management Co. Ltd. His qualifications are BA Management and MBA Finance. Prior to this, he has worked with Securities Trading Corporation Of India Ltd. for Sales & Trading of Fixed Income Products apart from doing Portfolio Advisory, and merchant banking experience with a leading merchant banking firm.
The other schemes managed by Mr Bisen are Kotak Bond Fund, Kotak Gilt fund, Kotak Debt Hybrid Fund, Kotak Gold Fund, Kotak Gold ETF, Kotak Equity Savings Fund, Kotak Equity Hybrid Fund, Kotak Balanced Advantage Fund, Kotak NASDAQ 100 Fund of Fund, and Kotak Nifty 50 Index Fund, Kotak Multicap Fund.
Fund Outlook – Kotak Nifty AAA Bond Plus SDL Apr 2026 70:30 ETF
Kotak Nifty AAA Bond Plus SDL Apr 2026 70:30 ETF will invest in high-quality Debt instruments comprising of Nifty AAA Bond Plus SDL Apr 2026 70:30 Index.
The scheme will aim to invest its assets in similar proportion by tracking the underlying index. The proportion of investment as per the underlying index into AAA rated bonds & SDLs is in the ratio of 70:30. The scheme offers investors high credit quality with a diversified Debt portfolio.
The yield curve currently providing a significant opportunity in the last 5-year spread. This scheme would provide investors with a great mix of stability and liquidity when compared to direct investment in bonds. Investment in debt mutual fund with target maturity approach enables investors the benefit to invest in individual bonds.
Being an exchange-traded fund, this scheme will follow passive investment style that reduces the fund manager’s role, thus resulting in low expense ratio as compared to actively managed Debt mutual funds. Investing passively in high quality AAA rated government-backed bonds and SDLs will make the scheme less prone to credit risk.
However, it may still carry some credit risk and interest rate risk depending on the dynamic market conditions and interest rate fluctuations. This scheme is suitable for investors with moderately high-risk profile looking forward to build their Debt portfolio and invest with a 5-year investment horizon.
This article first appeared on PersonalFN here
