JM Financial Mutual Funds has launched a corporate bond fund that is currently open for offering. Corporate bond funds typically invest in corporate bonds. These funds offer higher returns than bank FDs, but carry risks. These fixed income funds have generated returns of 4.5% to 7.7% over 3 to 5 years. In this article JM Bond Fund NFO Details of issues and various risk factors associated with such funds.
Also Read: UTI Launches Long-Term Fund – New Fund Offer
JM Corporate Bond Fund NFO – Issuance Details
Click here for NPO details
| The scheme will open | March 6, 23 |
| scheme close | March 20, 2023 |
| Schemes for continuous purchases/sales are reopened | Within 5 business days |
| Minimum amount | 5,000 rupees |
| Minimum SIP | Rs 500 for 12 months |
| Fund’s NAV | Rs 10 during NFO period |
| entry road | none |
| exit road | none |
| dangerous | moderate |
| standard | CRISIL Corporate Bond Fund BIII Index |
| fund manager | Mr. Guruvinder Singh Wasan Shalini Tibbewala |
| Maximum TER | 2.00% |
What is the investment objective of this MF scheme?
To generate income by investing primarily in corporate bonds rated AA+ and above while maintaining an optimal balance of yield, security and liquidity.
There is no assurance that the investment objectives of the Scheme will be realized.
What is the allocation pattern of this mutual fund?
The investment pattern of this fund is as follows:
| instrument type | min % | Max % | risk profile |
|---|---|---|---|
| Corporate bonds (AA+ or above) rating) |
80% | 100% | low to medium |
| bonds and money Market instruments (including units) investment trust scheme) |
0% | 20% | low |
| Investment units issued by REITs and InvITs | 0% | Ten% | medium to high |
Performance of existing corporate bond funds
Now let’s look at the performance of existing corporate bond mutual fund schemes.
| scheme name | 1 year | 3 years old | 5 years old |
|---|---|---|---|
| HSBC Corporate Bond Fund | 2.9% | 5.4% | 7.7% |
| Aditya Birla Sun Life Corporate Bond Fund | 4.7% | 6.4% | 7.5% |
| Sundaram Corporate Bond Fund | 4.4% | 5.8% | 7.4% |
| ICICI Prudential Corporate Bond Fund | 5.7% | 6.4% | 7.4% |
| HDFC Corporate Bond Fund | 4.1% | 6.1% | 7.4% |
| Axis Corporate Bond Fund | 4.7% | 6.5% | 7.3% |
| Franklin India Corporate Debt Fund | 4.1% | 5.1% | 7.1% |
| Kotak Corporate Bond Fund – Standard Plan | 4.3% | 5.7% | 7.1% |
| Japan-India Corporate Bond Fund | 4.8% | 6.1% | 7.0% |
| Invesco India Corporate Bond Fund | 3.5% | 5.4% | 7.0% |
| PGIM Indian Corporate Bond Fund | 4.2% | 5.9% | 6.9% |
| IDFC Corporate Bond Fund | 3.3% | 5.9% | 6.9% |
| Kanara Robeco Corporate Bond Fund | 3.8% | 5.4% | 6.8% |
| Baroda BNP Paribas Corporate Bond Fund | 2.4% | 4.6% | 4.5% |
Why invest in JM Bond Fund NFO?
There are several reasons to invest in such corporate bond funds.
1) This corporate bond fund invests more than 80% in securities rated AA or better. In my articles, I always keep pointing out that investors should choose A-rated bonds or FDs, which are relatively less risky (due to higher credit quality) than lower-rated securities (bonds rated below A). I’m here.
2) This bond fund aims to invest in bonds with relatively high interest rates and moderate credit risk (B-III).
3) Corporate bond funds have higher returns than government bonds, but they also carry risks. As you can see, corporate bonds have historically generated 8% to 10% annualized returns. However, the end of COVID-19 and lower interest rates have also reduced returns from these bonds. With interest rates rising and returning to pre-corona levels, we can expect higher returns from these corporate bond funds over the next few years.
4) This fund has no Macaulay duration limit. This means that you can invest in short-term or medium-term or long-term debt instruments.
5) Investments over 3 years offer indexing benefits.
Some important risk factors to consider before investing in such funds
You should consider some of these risk/negative factors before investing.
1) Invest up to 10% in high-risk REITs and InvITs.
2) We invest in bonds rated AA+, but such credit ratings are subject to downgrade at any time by credit rating agencies without prior notice. Any such rating downgrade would reduce the bond’s value and lower its NAV.
3) The fund invests up to 20% in government bonds that are highly volatile in the short term.
4) Please read the documentation associated with the scheme carefully before investing in such scheme.
Also Read: 5 Debt Funds With The Best SIP Returns In The Past Decade
Should I invest in JM Bond Fund NFO?
The JM Corporate Bond Fund invests primarily in AA+ rated corporate bonds. Such corporate funds have historically generated 8% to 10% annualized returns in the short to medium term (pre-COVID-19).
On the other hand, we invest up to 10% in higher risk REITs and InvITs. If the credit rating of the companies such schemes invest in declines, the value of the bonds will decline.
Medium to high risk investors can invest in such bonds for periods of 3 to 5 years.
If you like this article, please share it on Facebook or Twitter. This will be a special gift you give to our blog.
Suresh KP is the founder of Myinvestmentideas. He is his NISM Certified – Investment Advisor and NISM Certified – Research Analyst. He has been analyzing financial markets for the past 20 years.
