DSP Mutual Fund has announced the launch of the DSP US Treasury Fund of Fund (DSP UST FoF), an open-ended fund of funds scheme that invests in units of ETFs and/or funds focused on US Treasury Bonds. The fund aims to provide investors with an opportunity to benefit from the Federal Reserve’s (FED) interest rate policies by investing in US Treasuries. More than 95% of the fund’s assets will be invested in money market, floating rate, short, medium, and long duration funds.
The DSP UST FoF offers investors the potential to earn higher interest income from elevated US yields. US Yields are currently at near 10 and 20-year highs, providing an opportunity for investors to earn higher interest rates. Additionally, investors have the potential to earn mark-to-market gains from a higher duration portfolio when yields fall. The rate hike in the US has been higher compared to India, which could potentially lead to a higher probability and quantum of decline in yields in the US compared to India.
Active management of duration is another key advantage of the DSP UST FoF. The performance of different bond categories varies with the rate cycle, and active management with dynamic duration calls can help investors navigate US interest rate cycles and potentially earn better returns. Furthermore, the depreciation of the Indian Rupee (INR) against the US Dollar (USD) over the years makes exposure to USD beneficial for investors looking to earn from INR depreciation.
US Treasuries are typically considered a safe haven in times of distress and can play a pivotal role in asset allocation. The increased demand for USD as well as US Treasuries during times of crisis often leads to outperformance. Investors who plan for US-based expenses such as higher education need to consider both US inflation and INR depreciation, and US Treasury Bonds could help them account for both.
The New Fund Offer for the DSP UST FoF opened for subscription on March 7th, 2024, and will close on March 13th, 2024.
“This is an opportune time for investors to look at the potential existing from elevated US Treasury yields and their probable fall. The design of the fund offers investors the potential to earn better returns through active management of interest rate cycles. DSP UST FoF is also a great option for those with future US-based expenses,” says Sandeep Yadav, Head – Fixed Income, DSP Mutual Fund.
Investors interested in learning more about the DSP US Treasury Fund of Fund can find more information on the fund’s website.
