December 12 2023, Mumbai
Axis Mutual Fund’s Axis US Treasury Dynamic Bond ETF Fund of Fund (FoF) is a novel investment vehicle. This open-ended fund of funds invests in Exchange Traded Funds (ETFs) whose underlying assets are US Treasury securities with varying durations. This fund, designed to provide investors with access to the US Treasury market, marks a deliberate effort by Axis Mutual Fund to expand its offerings and appeal to a broader client base.
Axis US Treasury Dynamic Bond ETF FoF Highlights
Investment Plan
The fund primarily invests in a portfolio of exchange-traded funds (ETFs) that track particular portions of the US Treasury yield curve. The duration of the portfolio is maintained dynamically depending on macroeconomic assessments, with the goal of balancing capital appreciation and yield (‘carry’) opportunities. With a maturity cap of up to 15 years, the fund may include more ETFs as needed to respond to market conditions.
The NFO Period
The New Fund Offer (NFO) period ran from December 5th to December 11th, 2023, giving investors the opportunity to participate in the fund’s early stages.
Market Dynamics at Work
The launch of this fund comes at a time when US Treasuries are experiencing historical highs. This is primarily due to increased US government spending to combat the pandemic, leading to wider fiscal deficits and an expansion of the US Federal Reserve’s balance sheet. Additionally, the end of an easy monetary policy and changes in traditional international buying patterns have influenced the US bond markets.
Quoted from Axis Mutual Fund
“Based on this assessment, we believe the US G-Sec curve is likely to normalize to 3% levels over the medium term. This implies a 150bps capital appreciation opportunity over the medium term”
Investment Opportunity
The fund tries to capitalize on the present market environment, in which real rates on US 10-year Treasuries are at a 15-year high. However, such abnormal rates frequently reset quickly, giving a one-of-a-kind investing opportunity. By managing these fluctuating market conditions, the fund’s dynamic allocation strategy seeks to optimize returns for investors.
Fund Management Strategy
The Axis US Treasury Dynamic Bond ETF FoF is actively managed, which allows the fund manager to take an interest rate position and invest throughout the yield curve. This methodology allows the fund to pivot allocations in order to optimize the risk-return profile for investors throughout market cycles.
Considerations and Risks
The risks of investing in this fund should be understood by investors. Past performance and market circumstances of US Treasuries may not guarantee future results. Furthermore, because the fund invests in worldwide markets, it is vulnerable to currency risk and geopolitical risks.
Conclusion
The Axis US Treasury Dynamic Bond ETF Fund of Funds offers a one-of-a-kind option for investors wishing to diversify their portfolio by including exposure to US Treasury securities. Its dynamic management strategy and selective investment in US Treasuries of various maturities make it an appealing choice for investors looking to capitalize on current market dynamics.
[Note: Before investing in this fund, investors should speak with their financial advisors and assess their specific risk tolerance. The information provided here is based on the material provided and is not intended to constitute investment advice.