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Edelweiss’s Radhika Gupta and her Bharat Bond bet on passive debt funds

Radhika Gupta couldn’t be more optimistic on passive debt funds, calling them a “guaranteed game-changer”. Why won’t she? After all, Edelweiss Mutual Fund, of which she is the Managing Director and Chief Executive Officer, currently manages the most popular passive debt fund in India—the government’s Bharat Bond series. Its December 2021 issue Rs 1,000 crore ($135 million) was oversubscribed by more than 6X, in the middle This is the highest since the launch of the series in December 2019.

In fact, the Bharat Bond series has separated Edelweiss from #20 Ranked among over 40 mutual fund companies in India #14 In terms of assets under management (AUM). The AUM of the company is approx. zoomed in from Rs 24,000 crore ($3.23 billion) in December 2019 to Rs 87,000 crore ($11.7 billion) in December 2021. Out of this, approximately Rs 44,000 crore ($5.9 billion) Bharat Bond AUM.

Gupta’s utter bet on the Bharat Bond series is backed by two things- it is a passive debt fund and on top of that, a Targeted Maturity Fund (TMF) to boot.

Passive debt funds, like their equity counterparts, seek to ‘passively’ track the composition and performance of a benchmark index, as opposed to active funds which seek to outperform the index by ‘actively’ investing in specific securities . Passive funds are seen as a cheaper and safer option for both the fund house and the investor.

While this alone is enough to entice investors, the TMF position of the Bharat Bond series is the icing on the mutual fund cake. TMFs, as the name suggests, are funds that have a specific maturity date. Like for example Fixed Deposit (FD).

This is the position Gupta is taking – the option of fixed deposits. And a better option at that. “Fixed income investing is a big problem in India. TMF is a better solution than FD, which is the solution for an Indian investor in the Indian context,” says Gupta.

For one, interest rates Feather There has been a declining trend in FDs for some time now pair of been going for years About 7.5% to about 5.5% on average. Making matters worse is the tax on fixed deposits, in which interest is taxed at the investor’s slab rates. It can go up to 30%. Therefore, in many cases real rates have turned negative – what investors earn on their deposits is often less than the increase in their costs.

TMF is a ‘live’ opportunity for debt funds as the demand for fixed deposits in India is unbalanced.

– Radhika Gupta, Managing Director and Chief Executive Proposal, Edelweiss Mutual Fund

And yet, FDs are some of the most popular savings options in the country.

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