Axis Nifty AAA Bond Financial Services - Mar 2028 Index Fund – Direct (G) : NFO Details

Axis Mutual Fund has launched the Axis Nifty AAA Bond Financial Services - Mar 2028 Index Fund, an open-ended index fund that aims to provide investment returns closely aligned with the Nifty AAA Financial Services Bond Mar 2028 Index, subject to tracking error. The scheme seeks to replicate the performance of high-quality AAA-rated financial services bonds while keeping expenses low. The New Fund Offer (NFO) will be open for subscription from February 27, 2025, to March 4, 2025, with a minimum investment of ₹5,000 and in multiples of ₹1 thereafter. As a passively managed debt index fund, it does not carry any entry or exit load. However, there is no guarantee that the investment objective will be achieved. The fund is designed for investors seeking stable returns with lower risk exposure by investing in high-rated financial sector bonds maturing in March 2028.

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Details of the NFO: Axis Nifty AAA Bond Financial Services - Mar 2028 Index Fund – Direct (G)

Investment Objective and Strategy

Objective:

The investment objective of the Axis Nifty AAA Bond Financial Services - Mar 2028 Index Fund – Direct (G) is to provide investment returns before fees and expenses that closely correspond to the total returns of the securities as represented by the Nifty AAA Financial Services Bond Mar 2028 Index, subject to tracking error/ tracking difference.

There is no assurance that the investment objective of the Axis Nifty AAA Bond Financial Services - Mar 2028 Index Fund – Direct (G) will be achieved.

Investment Strategy:

The Axis Nifty AAA Bond Financial Services - Mar 2028 Index Fund – Direct (G) follows a passive investment strategy:

Axis Nifty AAA Bond Financial Services - Mar 2028 Index Fund is a passively managed index fund which will employ an investment approach designed to track the performance of Nifty AAA Financial Services Bond Mar 2028 Index.
The Axis Nifty AAA Bond Financial Services - Mar 2028 Index Fund – Direct (G) will follow Buy and Hold investment strategy in which debt instruments issued by the financial services sector will be held till maturity unless sold for meeting redemptions/rebalancing.

Axis Nifty AAA Bond Financial Services - Mar 2028 Index Fund – Direct (G) shall replicate the index. In case the Scheme is not able to replicate the index the Fund Manager may invest in other issuances within the limits specified and subject to conditions laid down by Para 3.5 of Master Circular for Mutual Funds as amended from time to time. During normal circumstances, the Scheme’s exposure to money market instruments will be in line with the asset allocation table. However, in case of maturity of instruments in the scheme portfolio, the reinvestment will be in line with the index methodology. 

The Scheme is an open-ended scheme. It is expected that there would be a number of subscriptions and redemptions on a daily basis. Consequently, it is difficult to estimate with any reasonable measure of accuracy, the likely turnover in the portfolio.

There may be an increase in transaction cost such as brokerage paid, if trading is done frequently. However, the cost would be negligible as compared to the total expenses of the Scheme. Frequent trading may increase the profits which will offset the increase in costs.

The fund manager will endeavor to optimize portfolio turnover to maximize gains and minimize risks keeping in mind the cost associated with it. However, it is difficult to estimate with reasonable accuracy, the likely turnover in the portfolio of the Scheme. The Scheme has no specific target relating to portfolio turnover. For details pertaining to Risk Controls and Risk Mitigation refer Point no. C Part I of Section II of the Scheme Information Document.

Risk associated with Axis Nifty AAA Bond Financial Services - Mar 2028 Index Fund – Direct (G)

The Axis Nifty AAA Bond Financial Services - Mar 2028 Index Fund – Direct (G) will be a passively managed scheme of replicating Nifty AAA Financial Services Bond Mar 2028 Index and tracking its performance and yield, before expenses, as closely as possible. The Axis Nifty AAA Bond Financial Services - Mar 2028 Index Fund – Direct (G) performance may be affected by the vagaries of the Indian markets relating to its underlying Index. Tracking Error/ Tracking Difference Risk The Fund Manager may not be able to invest the entire corpus exactly in the same proportion as in the  underlying index due to certain factors such as delay in purchase or non-availability of underlying securities forming part of the index, the fees and expenses of the Scheme, corporate actions, cash balance, changes to the underlying index and regulatory restrictions, which may result in Tracking Error with the underlying index of the Scheme. The Scheme’s returns may therefore deviate from its underlying index.

“Tracking Error” is defined as the standard deviation of the difference between daily returns of the underlying index and the NAV of the Scheme. The Fund Manager would monitor the Tracking Error of the Scheme on an ongoing basis and would seek to minimize the Tracking Error to the maximum extent possible. Tracking Error may arise due to the following reasons:

• Delay in purchase or non-availability of underlying securities forming part of the index.
• Delay in liquidation of securities which have been removed by the Index.
• Difference in valuation of underlying securities by the Index Provider and AMC’s valuation providers.
• Expenditure incurred by the Fund.
• Available funds may not be invested at all times as the Scheme may keep a portion of the funds in
• cash to meet Redemptions, or corporate actions or otherwise.
• Corporate actions such as debenture or warrant conversion, mergers, change in constituents etc.
• Interest payout.
• Index providers undertake a periodical review of the securities/scrips that comprise the underlying
• index and may either drop or include new securities/scrips.

In such an event, the Fund will try to reallocate its portfolio but the available investment/ reinvestment opportunity may not permit absolute mirroring immediately. SEBI Regulations (if any) may impose restrictions on the investment and/or divestment activities of the Scheme. Such restrictions are typically outside the control of the AMC and may cause or exacerbate the Tracking Error.

The following are the risks associated with investment in fixed income securities:

Interest-Rate Risk: Fixed income securities such as government bonds, corporate bonds, and money
market instruments run price-risk or interest-rate risk. Generally, when interest rates rise, prices of existing
fixed income securities fall and when interest rates drop, such prices increase. The extent of fall or rise in
the prices depends upon the coupon and maturity of the security. It also depends upon the yield level at
which the security is being traded.

Re-investment Risk: Investments in fixed income securities carry re-investment risk as interest rates prevailing
on the coupon payment or maturity dates may differ from the original coupon of the bond.
Basis Risk: The underlying benchmark of a floating rate security or a swap might become less active or may
cease to exist and thus may not be able to capture the exact interest rate movements, leading to loss of
value of the portfolio.

Spread Risk: In a floating rate security the coupon is expressed in terms of a spread or mark up over the
benchmark rate. In the life of the security this spread may move adversely leading to loss in value of the
portfolio. The yield of the underlying benchmark might not change, but the spread of the security over the
underlying benchmark might increase leading to loss in value of the security.

Liquidity Risk: The liquidity of a bond may change, depending on market conditions leading to changes in
the liquidity premium attached to the price of the bond. At the time of selling the security, the security can
become illiquid, leading to loss in value of the portfolio.

Credit Risk: This is the risk associated with the issuer of a debenture/bond or a money market instrument
defaulting on coupon payments or in paying back the principal amount on maturity. Even when there is
no default, the price of a security may change with expected changes in the credit rating of the issuer. It
is to be noted here that a Government Security is a sovereign security and is the safest. Corporate bonds
carry a higher amount of credit risk than Government securities. Within corporate bonds also there are
different levels of safety and a bond rated higher by a particular rating agency is safer than a bond rated
lower by the same rating agency.

Liquidity Risk on account of unlisted securities: The liquidity and valuation of the Scheme investments due
to their holdings of unlisted securities may be affected if they have to be sold prior to their target date of
divestment. The unlisted security can go down in value before the divestment date and selling of these
securities before the divestment date can lead to losses in the portfolio.

Settlement Risk: Fixed income securities run the risk of settlement which can adversely affect the ability of
the fund house to swiftly execute trading strategies which can lead to adverse movements in NAV.