A brief guide to Bajaj Finserv Banking and PSU Fund?

Banking and PSU funds are debt mutual funds that mainly invest in instruments issued by banks and Public Sector Undertakings (PSUs). These funds are known for their relative stability and lower risk profile compared to equity funds, making them a preferred choice for conservative investors. The Bajaj Finserv Banking and PSU Fund is an open-ended debt scheme falling under this category. It can be a suitable option for investors looking for a short to medium term investment with a moderate/low-to-moderate level of risk. The scheme primarily invests in debt instruments of banks, public sector undertakings (PSUs), and public financial institutions.

Let’s take a closer look at the investment strategy of the Bajaj Finserv Banking and PSU Fund and understand other aspects of this scheme.

• Table of contents

1. Bajaj Finserv Banking and PSU Fund investment strategy – key points
2. Risk management approach
3. Interest rate strategy
4. Credit quality and analysis
5. Liquidity management
6. Portfolio diversification
7. Alignment with benchmark
8. Regular monitoring and rebalancing
9. FAQ

Bajaj Finserv Banking and PSU Fund investment strategy – key points

The scheme shall manage and operate its investment strategy within the inhouse framework of the INQUBE fund philosophy. The scheme aims to invest in securities issued by banks and financial institutions across maturities, focusing on credit quality and income yield or accrual. It will invest in debt and money market instruments issued by entities such as Scheduled Commercial Banks, Public Financial Institutions (PFIs), Public Sector Undertakings (PSUs), Municipal Corporations and such other bodies, and may also invest in, the schemes of mutual Funds.

No guaranteed returns are being offered under the Scheme. Money Market securities include cash and cash equivalents, and investment in debt and money market securities issued by banks, PSU, PFI and Municipal Bonds is primarily to maintain high credit quality and ensure relative stability.

Risk management approach

Risk management is a critical aspect of a banking and PSU fund’s investment strategy. The fund attempts to balance credit risk (the risk of default by the issuer of a debt instrument) and interest rate risk (the risk arising from changes in market interest rates). By diversifying its portfolio across various issuers and maturities, the Bajaj Finserv Banking and PSU Fund seeks to minimise the impact of an individual security's performance on the overall portfolio.

Interest rate strategy

Interest rate movements can significantly affect debt instruments. This fund employs an active interest rate management strategy, adjusting its portfolio in response to changes in the interest rate environment. This approach involves altering the duration of the portfolio based on the fund manager's view of the interest rate trajectory.

Credit quality and analysis

The credit quality of instruments is a key focus area. The fund primarily invests in instruments that are rated high on the scale of being creditworthy. Rigorous credit analysis is conducted before any investment to assess the issuer's ability to meet its financial obligations. This analysis includes looking at the issuer's financial health, industry outlook, and macroeconomic factors.

Liquidity management

Liquidity is another important factor in debt fund management. The fund seeks to ensure that a portion of its portfolio is invested in highly liquid instruments, allowing it to meet any redemption requests. This liquidity management also enables the fund to take advantage of investment opportunities as they arise. Given that the Bajaj Finserv Banking and PSU Fund is an open-ended scheme, it offers liquidity with the provision for sale and repurchase of units within 5 business days from the date of allotment.

Portfolio diversification

Diversification across sectors and issuers is another key element of the fund’s investment strategy. By not over-concentrating the investments in any single issuer or sector, the fund aims to reduce the impact of any specific economic or sectoral downturns.

Alignment with benchmark

The fund’s performance is benchmarked against the NIFTY Banking and PSU Debt Index. This alignment ensures that the fund’s composition reflects the broader market trends in the banking and PSU debt instrument space, while also allowing for active management to generate alpha (excess returns over the benchmark).

Regular monitoring and rebalancing

The fund is managed by the investment experts at Bajaj Finserv AMC, who regularly monitor and rebalance the portfolio as and when the need arises. This dynamic approach ensures portfolio alignment with the fund’s investment objectives, allowing the fund to adapt to changing market environments.

Conclusion

The investment strategy for banking and PSU funds seeks to offer a mix of relative stability and returns. It presents a balanced approach for investors seeking income through a moderate risk investment in the banking and PSU sectors. The fund effectively balances the need for income generation, risk management, and liquidity. However, it is important for investors to understand the fund's strategy and associated risks to assess if it is suited to their portfolio. For a detailed scheme information, click here.

FAQs:

What is the primary investment focus of the Bajaj Finserv Banking and PSU Fund?
The fund primarily invests in debt instruments issued by banks, PSUs, and public financial institutions.

How does the Bajaj Finserv Banking and PSU Fund manage risk?
The fund maintains a moderate risk profile, balancing interest rate risk and credit risk through diversified investments.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
This document should not be treated as endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.