Edelweiss Nifty PSU Bond Plus SDL Index Fund – 2026 Review

Published: March 10, 2021 at 9:25 am

Last Updated on March 10, 2021 at 9:25 am

Edelweiss Nifty PSU Bond Plus SDL Index Fund – 2026 is an open-ended target maturity Index Fund predominantly investing in the constituents of Nifty PSU Bond Plus SDL Apr 2026 50:50 Index. The fund has a maturity date of April 30th 2026, after which the assets will be distributed to unitholders. This article explains the features and risks of this fund and discusses when it makes sense to invest in this fund.

The Nifty PSU Bond Plus SDL 50:50 Index appears to be a custom-made index by the NSE for Edelweiss. The index portfolio will consist of 50% public sector undertakings (PSUs) and 50% State Development Loans (SDLs) – the fund will hold 95-100% of this index and the rest in cash to handle daily transactions.

Key features of Edelweiss Nifty PSU Bond Plus SDL Index Fund – 2026

  1. All the bonds in the portfolio will mature before April 30th 2026, and the fund will not sell any of the bonds unless they have to – too many or too large a redemption. Inflows can also cause a deviation from the index.
  2. The risk of default in these holdings is low. However, if the credit rating of the PSU bonds falls from AAA, the NAV will fall. The bond will be replaced during the next rebalance with another AAA bond. However, the fund’s return will deviate from indicative yield at the NFO stage (applicable to point 1).
  3. The initial yield to maturity of the index is 6.3%. The fund’s maturity will depend on points 1 and 2. This will constantly vary depending on changes in the index portfolio and the funds in and outflows.
  4. The initial modified duration of the fund is 4.04 years. The modified duration is a measure of how much the price of a bond and, therefore, the NAV of a debt mutual fund will change if interest rates change by 1%. For this index, the modified duration will gradually decrease as the fund heads towards maturity.
  5. The NAV of  Edelweiss Nifty PSU Bond Plus SDL Index Fund – 2026 will be quite volatile in the first few years.
    • The modified duration of Quantum Liquid Fund is 0.12 years and fluctuations in NAV over the last three years as measured by the standard deviation is 0.44%.
    • The current modified duration of ICICI Prudential Bond Fund is 4.23 years (this, as of now, holds only SOV and AAA bonds). Its standard deviation over the last three years is 3.14% – that is about seven times more volatile than a liquid fund. Even if you wish to buy and hold until maturity, it is important to appreciate the magnitude of this expected volatility.
    • As a target maturity index fund, the modified duration of Edelweiss Nifty PSU Bond Plus SDL Index Fund – 2026 will keep reducing with each year, and so will the volatility.

Who should invest in this fund?

I wish to invest in this fund but will redeem it before the maturity date, say three years. What return will I get? No one knows. It is pot luck. The interest rate risk (as measured by the modified duration) will be quite high in this fund (relative to a liquid fund), and the NAV will be quite volatile. Even losses are, in principle, possible. We recommend that you not invest in this fund if you need the money before the maturity date.

I wish to invest a lump sum in this fund and will hold until maturity? Is it safe? What return will I get? Holding until maturity is significantly safer than redeeming mid-way or investing in an open-ended fund with a modified duration of about four years. This is because the interest risk is significantly reduced if the bonds are held until maturity (some bonds may be sold midway to handle redemptions).  The risk of default is quite less.


Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

So if you wish to invest a lump sum for five years, the risk is reasonable and relatively lower than any open-ended debt fund. You can expect a return of about 5.5% before tax. The risk will be higher than a fixed deposit, say in SBI, but that is the price you will have to pay if you desire lower tax outgo.

I wish to start a SIP in Edelweiss Nifty PSU Bond Plus SDL Index Fund until April 2026. Is it safe? What return can I expect? The safety issues for a SIP are similar to that of a lump sum, as mentioned above. The return is harder to estimate as the NAV will fluctuate significantly due to market forces. The first few instalments will be invested in a medium duration bond fund, while the last few instalments will be invested in a short-term –> ultra short-term –> liquid fund. This is because the average portfolio maturity period is continuously falling.

In summary, Edelweiss Nifty PSU Bond Plus SDL Index Fund – 2026 has some welcome features:

  • Passive investment (albeit in an index with no history available! The factsheet released only today by NSE, 10th March, still has the confidential stamp! Although the AMC had this info on their promotional page).
  • Target maturity date, which reduces interest risk if the investor holds on.
  • A portfolio with a good credit rating.
  • There is only one catch: the maturity date is just five years away.

During this period, no great amount of wealth can be made by investing in this fund compared to an SBI/ICICI/HDFC bank FD or RD.  Yes, this fund, in all likelihood, should be able to fetch better post-tax returns (as per current FD rates). Still, the benefit would be at best marginal and not worth it for an investor unfamiliar with NAV movements, in particular, senior citizens.

This idea’s main USP is a combination of open-endedness and closed-endedness (maturity date) and not passive nature or low TER. The maturity date significantly reduces the interest rate risk on the final redemption, and the open-endedness allows an investor to buy and sell at will. These features are suited for a long-term goal where a portfolio can be systematically or tactically rebalanced. However, when the duration is just five years, these benefits are largely minuscule.

Investors who appreciate bond market risks and have short/medium-term needs five years or more away can invest in this fund instead of a bank FD. Others, particularly senior citizens, are better off ignoring this NFO.

Do share this article with your friends using the buttons below.

🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
Follow Freefincal on Google News
Follow Freefincal on Google News
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! 
Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let's Get Rich with Pattu Podcast
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
Lets Get RICH With PATTU podcast on YouTube
Let's Get RICH With PATTU podcast on YouTube.

  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Have a question? Subscribe to our newsletter with the form below.
  • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!

Explore the site! Search among our 2000+ articles for information and insight!

About The Author

Pattabiraman editor freefincalDr. M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter, Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
Our new book for kids: “Chinchu gets a superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both the boy and girl version covers of Chinchu gets a superpower.
Most investor problems can be traced to a lack of informed decision-making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it and teach him several key ideas of decision-making and money management is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & it's content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)