Wednesday April 25, 02:45 PM
DSP Merrill Lynch Strategic Bond Fund |
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By Personalfn.com
Summary
Type : Open-ended Debt: Miscellaneous
Benchmark : CRISIL (CRSL.BO, news) Composite Bond
Min. Investment : Rs 5,000
Face Value : Rs 1,000
Entry Load : Nil
Exit Load : Nil
Issue Opens : April 23, 2007
Issue Closes : May 3, 2007
Investment Objective*
DSP Merrill Lynch Strategic Bond Fund is an open ended income Scheme seeking to generate optimal returns with high liquidity through active management of the portfolio by investing in high quality debt and money market securities. However, there is no assurance that the objective of the Scheme can be realised.
*Source: Offer document
Is this fund for you?
At a time when interest rates are moving northwards and investments in conventional long-term debt offerings are turning unattractive, DSP ML Mutual Fund has introduced a rather innovative fund for debt fund investors. DSP Merrill Lynch Strategic Bond Fund (DMSBF) is an open-ended debt fund, which aims to generate returns by investing in high quality debt and money market instruments.
The fund's positioning sets it apart from conventional debt fund offerings. DMSBF is like an opportunities fund from the debt funds segment. The fund can invest in a wide range of instruments (government securities, money market instruments and corporate bonds, among others) depending on the market conditions. Also, it can hold varying maturity profiles i.e. it can invest in debt instruments having varied maturity (long-term as well as short-term) periods.
Investors would do well to understand that debt as an asset class has an important role to play in every individual's asset allocation. Within the sphere of debt investments, DMSBF offers a rather unique investment proposition. Investors who wish to invest in debt instruments and stay invested over the long-term (minimum 1-Yr) can consider investing in DMSBF.
Over the years, DSP ML Mutual Fund has built a reputation of delivering the goods, across mutual fund categories. We are inclined to believe that the fund house's process-driven investment style and fund management expertise will stand it in good stead while managing DMSBF.
Portfolio Strategy
| Instruments |
Allocation Range |
Money market securities and/or debt securities with residual
or average maturity of less than or equal to 367 days
or put options within a period not exceeding 367 days. |
0%-100% |
Debt securities which have residual
or average maturity of more than 367 days. |
0%-100% |
DMSBF has the flexibility to transform itself into a liquid fund, a short-term fund, a bond fund or a government securities fund depending on the market conditions. In effect, it offers investors the opportunity to invest in a variety of debt instruments, while remained invested in a single fund.
The fund house has also indicated that DMSBF will utilise strategies involving interest rate swaps to change modified duration actively. Duration is the tenure for which a portfolio of bonds or a bond must be held, for the investor to be immune to interest rate changes. The fund will also deploy uncorrelated interest rate trading strategies to lower volatility in returns.
Fund Manager Profile
Mr. Dhawal Dalal is the Senior Vice President - Head Fixed Income Schemes. He joined Merrill Lynch Investment Managers in 1996 after receiving his MBA from the University of Dallas. Mr. Dalal has also been associated with the Merrill Lynch Private Client Group and the money market desk of Merrill Lynch Investment Managers. He returned to India to join DSP Merrill Lynch Fund Managers.
Outlook
Given that DMSBF will pursue a fluid investment style (transforming itself into a liquid fund, a short-term fund, a bond fund or a government securities fund), it will be equipped to navigate the vagaries in debt markets. Also, we believe that DMSBF will benefit from the fund house's process-driven investment approach.
However, investors would do well to understand the investment proposition offered by DMSBF is unlike that of a conventional debt fund. Hence only that portion of the investible surplus, which is earmarked for debt investments, with a long-term investment tenure, should be invested in the fund.
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