DSP Mutual Fund launches US bond fund with flexibility on duration

Scheme to actively manage duration through seven US bond ETFs

DSP Mutual Funds on Thursday launched its first US bond fund, joining the likes of Bandhan, Aditya Birla Sun Life and Axis. The move will offer investors an opportunity to invest in US treasuries amid elevated yields and growing rate-cut expectations.

The DSP US Treasury Fund of Fund (FoF) will actively manage its allocation across seven US-based exchange-traded funds (ETFs). These ETFs hold a diverse range of papers with durations ranging from one month to 10 years.

“US yields are at an elevated level and are near 10 and 20-year highs. This presents an opportunity for investors to park money at a higher interest rate. Investors also have the opportunity to earn mark to market gain from higher duration portfolios when yields fall,” DSP MF said in a statement.

The fund house pointed out that the opportunity for gains from rate cuts is higher in the US, going by the difference in the quantum of hikes. “The quantum of rate hike in the US has been higher as compared to India; accordingly, the probability and quantum of decline in yields can be potentially higher in the US compared to India,” it said.