{"id":459,"date":"2019-06-19T05:32:57","date_gmt":"2019-06-19T05:32:57","guid":{"rendered":"http:\/\/blog.certifiedfinancialguardian.com\/?p=459"},"modified":"2019-06-19T07:08:55","modified_gmt":"2019-06-19T07:08:55","slug":"should-you-invest-in-sundaram-ultra-short-term-fund-for-your-short-term-needs","status":"publish","type":"post","link":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/2019\/06\/19\/should-you-invest-in-sundaram-ultra-short-term-fund-for-your-short-term-needs\/","title":{"rendered":"Should Investors Invest In Sundaram Ultra Short-Term Fund For Short-term Needs?"},"content":{"rendered":"\n

Lately, there has been a rise in launch of debt funds holding debt instruments having a duration of less than a year. This is because recent episodes of default in payments have led to downgrading of companies and made investors lose interest<\/a> of investing in debt funds, as most of the debt funds were having exposure to the toxic papers of defaulters<\/a>. <\/p>\n\n\n\n

And Fund houses wanted to offer respite to\nthe distraught investors, to keep them interested in debt fund investment. <\/p>\n\n\n\n

Hence even Sundaram Mutual Fund<\/a> launched an open-ended debt scheme, Sundaram Ultra Short-Term Fund (SUSTF) that will invest in instruments with Macaulay Duration of the portfolio between 3 months to 6 months<\/p>\n\n\n\n

Ultra-short-term funds invest primarily in debt and money market instruments such that the Macaulay duration of the portfolio is between 3 months to 6 months. Compared to a liquid fund<\/a> an ultra-short-term fund invests in higher maturity debt papers and money market instruments.<\/p>\n\n\n\n

Note that the bond prices are inversely\nrelated to the interest rates. Hence if a bond that has a longer maturity, is\nextremely price-sensitive to changes in the interest rate as compared to bonds\nhaving a short duration. An ultra-short-term fund help investor reduce this\ninterest rate risks and offer better returns than most money market\ninstruments. <\/p>\n\n\n\n

The Macaulay duration measures the weighted\naverage term to maturity of the bond\u2019s cash flow. The weights in this weighted\naverage are the present value of each cash flow as a per cent of the present\nvalue of all the bond\u2019s cash flows. <\/p>\n\n\n\n

Macaulay\u2019s Duration is linked to the price volatility of a bond. Duration is the fund manager\u2019s tool for structuring a portfolio of bonds to have the desired sensitivity to maintain between 3 to 6 months. As per the mandate, SUSTF will allocate all its assets<\/a> in derivatives, securitised debts and in repo within the prescribed limits. <\/p>\n\n\n\n

From the risk-return standpoint, SUSTF is a relatively moderately low risk-return<\/a>. If you are planning for short-term goals<\/a>, to where the money is required in 3 to 6 months, the ultra-short-term fund may be considered. The ideal time horizon to park money in an ultra-short-term fund is 3 to 6 months.<\/p>\n\n\n\n

[Read<\/strong>: Why Comparing Returns to Risk Is More Meaningful!<\/a>]<\/strong><\/p>\n\n\n\n

Table\n1: NFO Details<\/em><\/strong><\/p>\n\n\n\n

\n \n \n \n \n \n \n \n
Type<\/strong><\/td>\n An open-ended debt scheme investing in instruments with Macaulay Duration of the portfolio between 3 months to 6 months.<\/td>\n Category<\/strong><\/td>\n Ultra-Short Duration Fund<\/td>\n <\/tr>\n
Investment Objective<\/strong><\/td>\n To generate regular income by investing predominantly in debt and money market instruments.\u00a0
\n No Guarantee: <\/strong>Investors are neither being offered any guaranteed\/indicated returns nor any guarantee on repayment of capital by the Schemes. There is also no guarantee of capital or return either by the mutual fund or by the sponsor or by the Asset Management Company.<\/td>\n <\/tr>\n
Min. Investment<\/strong><\/td>\n Rs 1,000 and in multiples of Re 1 thereafter<\/td>\n Face Value<\/strong><\/td>\n Rs 10 per unit<\/td>\n <\/tr>\n
Plans <\/strong><\/td>\n \u2022 Direct
\n \u2022 Regular<\/td>\n 		Options<\/strong><\/td>\n \u2022 Growth (default option)
\n \u2022 Dividend\n
    \n
  • Pay-out <\/li>\n
  • Sweep<\/li>\n
  • Re-investment (default option)<\/li>\n <\/ul><\/td>\n <\/tr>\n
Entry Load<\/strong><\/td>\n Not Applicable<\/td>\n Exit Load<\/strong><\/td>\n Nil<\/td>\n <\/tr>\n
Fund Manager<\/strong><\/td>\n Mr Siddharth Chaudhary and Mr Sandeep Agarwal<\/td>\n Benchmark Index<\/strong><\/td>\n CRISIL Ultra Short Term Debt Index<\/td>\n <\/tr>\n
Issue Opens<\/strong><\/td>\n 14\/06\/2019<\/td>\n Issue Closes:<\/strong><\/td>\n 20\/06\/2019<\/td>\n <\/tr>\n<\/table><\/center>\n\n\n\n

(Source: Scheme\nInformation Document<\/a>)<\/p>\n\n\n\n

How will Sundaram Ultra Short-Term Fund allocate\nits assets?<\/strong><\/p>\n\n\n\n

Under normal circumstances, the asset allocation<\/a> pattern will be as under:<\/p>\n\n\n\n

Table\n2: SUSTF\u2019s Asset Allocation<\/em><\/strong><\/p>\n\n\n\n

\n \n \n
 <\/strong>\n Instruments<\/strong><\/td>\n % of the Investible funds (indicative)<\/strong><\/td>\n Risk Profile<\/strong><\/td>\n <\/tr>\n
Debt instruments, Money Market instruments & cash and cash equivalents*<\/td>\n Up to 100%<\/td>\n Low to Medium<\/td>\n <\/tr>\n<\/table><\/center>\n\n\n\n

* Ensuring\nthat the Macaulay duration of the portfolio will be maintained between 3 to 6\nmonths.\n