MIRAE Asset Short Term Bond Fund – Mutual Fund NFO

MIRAE Asset Short Term Bond Fund: Type of Scheme

This is an open ended bond fund, and will hold a diversified portfolio of actively managed debt and money market funds. The underlying index is the CRISIL Short Term Bond Fund Index, and the fund’s performance should be benchmarked against this index.

The CRISIL Short Term Bond Fund Index (STBEX) returned 9.79% in the one year period from April 2008 – March 2009.

Now, I know that a lot of people equate bonds and debt to “risk free”, and shares or equity to “risky”, so let’s get this one thing out of the way first.

This is not a risk free investment and there is no guarantee of returns. Let me repeat that once more, there is no guarantee of returns if you invest in this scheme, just like there is no guarantee in other equity mutual funds. It is not the same as opening a fixed deposit in the State Bank of India.

You can think of it as less risky, but not risk free. The reason is that such funds allow you to diversify and reduce your exposure to equities.

For example, the underlying index of this fund returned 9.79% for the financial year 2008 – 09. In the same period, Nifty gave returns of 38.87%.

Now, let’s take a look at where the MIRAE Asset Short Term bond fund will invest.

The fund will invest at least 20% of its assets in money market instruments and debt instruments, which have a remaining maturity of less than 182 days (about six months). Such investments are considered low risk.

The remaining funds (up to 80% of assets) will be invested in money market instruments and debt instruments, which have a remaining maturity of greater than 182 days.

To detail it out a bit further, the fund will invest in:

  • Securitized debt
  • Derivatives
  • Foreign Securities
  • Treasury Bills
  • Commercial Paper
  • Term Money
  • Certificate of Deposit
  • Government Securities with unexpired maturity of one year or less
  • Debt Obligations of the governments, public, private companies and financial institutions (among others).

Opening and Closing Dates of MIRAE Asset Short Term Bond Fund

The MIRAE NFO opened on 23rd June 2009 and is going to close on 22nd July. After that; the scheme will reopen on 12th August 2009, for you to sell units, if you already bought them, and repurchase, if you don’t already have them, and are now interested.

Entry and Exit Loads of MIRAE NFO

The entry load is NIL.

There is an exit load of 0.25%, if you sell within 90 days of allotment.

The AMC estimates that the cost of running the fund (expense ratio) will be 2.25% of the weekly / daily average net assets for the regular plan and 2.10% for the institutional plan.

Minimum Investment for MIRAE NFO

The minimum amount that you can invest in the MIRAE NFO is Rs.5,000.

Scheme Types

There are Dividend and Growth types of this scheme. The dividend can be paid out monthly or quarterly (based on the surplus and discretion of the fund manager, no guarantees). There is also an option of reinvesting the dividend back in the scheme or reinvesting the dividend in other scheme of the mutual fund.

If you don’t specify which option you want, by default, you will get the growth option.

You can also get into a Systematic Investment Plan (SIP) for this MIRAE Asset plan.

Further Information

Here are links to the website of the fund and its key information memorandum.