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IDFC Mutual Fund on Wednesday announced the launch of two innovative fixed income funds, the IDFC Gilt 2027 Index Fund and the IDFC Gilt 2028 Index Fund.

Both funds are open-ended Target Maturity Index Funds which will invest in government securities and treasury bills that constitute the CRISIL Gilt 2027 Index and Gilt 2028 Index respectively. The New Fund Offer (NFO) opens on Friday, March 12, 2021 and closes on Friday, March 19, 2021, said a company statement.

Target maturity funds have a defined maturity date, unlike regular open-end mutual funds that remain open indefinitely. Upon maturity, the net asset value of these funds will be paid back to unitholders.

Additionally, IDFC's Gilt Index Funds will invest only in sovereign rated instruments- which are guaranteed by the Government of India -- thereby reducing any credit risk.

These funds will also steadily reduce the residual maturity of investments over the holding period, thereby reducing duration risk or the fund's sensitivity to a change in interest rates.

Vishal Kapoor, CEO, IDFC Asset Management Company said: "The IDFC Gilt 2027 Index Fund and IDFC Gilt 2028 Index Fund are ideally suited for investors seeking high quality investments with a matching investment time horizon."

He added that the funds are positioned with an aim to benefit from the current steep yield-curve, and we believe that 6-year and 7-year Government Securities are relatively attractive versus ultra-short tenor securities as well as corporate bonds when compared to average spreads over the last five years.

Both funds are open-ended and will offer a daily purchase and redemption facility. The minimum investment amount is Rs 5,000, and there will be no exit load on redemptions.

The IDFC Gilt 2027 Index Fund will mature on June 30, 2027, and the IDFC Gilt 2028 Index Fund will mature on April 05, 2028.