SBI Low Duration Fund: A Perfect Option for Low Risk Investors

Want to invest in the short-term debt funds with low risk? Read the article which is providing the details of SBI Magnum Low Duration Fund.

In any portfolio, it always good to have diversification across asset classes. One of such very large important asset class is the debt which should be a part of your portfolio allocation. However, the proportion of investment can differ according to the objectives, time horizon, etc. The debt category mutual fund schemes offer a full range of products and one among them is for the investors who want to invest for 6 to 12 months. The category is perfect for investors with limited risk appetite, and they can invest in SBI Magnum Low Duration Fund for capital appreciation. The portfolio bucket of the fund is full of diversification and tries to minimise the risk for investors by investing in the best securities.

Risk-Taking Ability

If your objective is near term and you want to park some of your extra cash in any other options rather than a traditional savings account, FD etc., then you can go for investing in SBI Low Duration Fund. The fund is allocating its assets of Rs 6,615 Cr (as on Oct 31, 2018) in high credit rating and low-interest rate sensitive papers. The average rating of its portfolio is AAA which majorly includes a certificate of deposits, debentures, bonds, and commercial papers. These instruments have an ability to the downturn the market risk and provide risk-adjusted returns to the investors.

The fund has invested mainly in AAA-rated papers in the current market, and these corporate bonds are offering handsome returns. We have a repo rate of 6.5, and overnight rates are 7% to 7.25%. Therefore, triple-A bonds which are almost providing interest of 8.8%. So, you are getting 2.3 percent extra for just taking a bit more tenure and going for investment in the fund.

Unbeatable Short and Long-Term Returns:

Currently, the fund is investing in 63 securities, which have an average maturity of 0.55 years and yield approximately 8.44% of returns till maturity. This shows that SBI Magnum Low Duration Fund- Growth Plan offers approximately 7%-8% of returns in 12 months. This can also be seen in its past performance when the fund was unbeatable by its benchmark and offer high returns as compared to peers. The fund has given the annualised returns of 7.36% in the past three years, 8.05% in five years, and 8.36% in seven years. These returns were higher than its category average as well as an index to provide high returns to the investors in the long run. The investors investing in the fund are looking for short-term capital appreciation;, the calendar year returns of the fund are shown in the graph below:

The fund has provided the compounded annualised growth returns of 7.80% since its launch, i.e., July 2017, which shows that it has the capability to offer good returns with minimum risk to the investors.

Zero Exit Load:

SBI Magnum Low Duration Fund G tries to provide regular income in the form of interest to the investors by investing in debt and money market securities by keeping a reasonable degree of liquidity in its portfolio. This is because it is a short duration scheme where investors park their idle capital and redeem whenever require, so the fund management team meets the requirement of investors through these liquid instruments. Being an ultra short-term fund, it has zero percent of exit load, and investors can redeem their capital anytime without worry about the taxes. However, it is liable for long-term capital gain tax if a person stays invested for more than three years.

SBI Magnum Low Duration Fun- Regular Plan aims to provide attractive returns to the investors by actively managing the credit as well as the interest rate risk in its portfolio. So, investors who want to invest in this fund should know that the returns in it can be of a liquid kind and the chances are low.