Mutual funds rush to launch passive debt funds; 8 NFOs open, 12 more in pipeline

Passive investments strategy is making inroads into the Indian mutual fund in a big way. There are eight passive debt New Fund Offers currently open in the market and many more in the pipeline. Fund houses have filed drafts for as many as 12 new passive debt funds with the Securities and Exchange Board of India. Aditya Birla Sun Life Mutual Fund and HDFC Mutual Fund are leading with the maximum number of drafts.

Here’s a list of NFOs that are open at the moment:

Scheme name	NFO Open	NFO Close
ABSL CRISIL IBX 50:50 Gilt+SDL Apr 2028 Index	28-Sep	12-Oct
ABSL CRISIL IBX Gilt-April 2026 Index	28-Sep	06-Oct
ABSL Nifty SDL Sep 2025	22-Sep	27-Sep
Edelweiss CRISIL IBX 50:50 Gilt Plus SDL April 2037	27-Sep	06-Oct
SBI CRISIL IBX Gilt Index-April 2029	26-Sep	03-Oct
SBI CRISIL IBX Gilt Index-June 2036	22-Sep	03-Oct
SBI CRISIL IBX SDL Index-September 2027	26-Sep	03-Oct
Tata CRISIL-IBX Gilt Index-April 2026 Index	23-Sep	28-Sep

part from the schemes mentioned above, many more schemes are waiting for Sebi’s approval and will be launched soon. Here’s a list of draft documents that have been filed with Sebi and pending for approval:

• Aditya Birla Sun Life CRISIL IBX SDL Sept 2028 Index Fund
• Aditya Birla Sun Life CRISIL IBX Gilt Apr 2029 Index Fund
• Aditya Birla Sun Life Nifty SDL Sep 2027 Index Fund
• Aditya Birla Sun Life CRISIL IBX Gilt – April 2026 Index Fund
• Aditya Birla Sun Life Nifty SDL Plus AAA PSU Apr 2028 65:35 Index Fund
• Aditya Birla Sun Life Nifty SDL Plus AAA PSU Apr 2028 75:25 Index Fund
• HDFC Nifty Gsec Dec 2032 Index Fund
• HDFC Nifty Gsec Dec 2026 Index Fund
• HDFC Nifty SDL Sep 2032 Index Fund
• HDFC Nifty SDL Sep 2028 Index Fund
• HDFC Nifty SDL Sep 2027 Index Fund
• HDFC Nifty SDL Sep 2026 Index Fund

Mutual fund advisors and fixed income analysts believe that the interest rate scenario has played a part in the rise of these NFOs. They say that the yields are attractive in the three to five year segment and the fund houses are trying to be present in those segments.

“The number of NFOs have gone up suddenly after SEBI gave a go ahead to fund houses after a ban of three months recently. However, there are other reasons for a lot of new Target Maturity Funds coming to the market, especially from bigger AMCs. TMFs are an evolving category and it is safe to say that TMFs have replaced FMPs (Fixed Maturity Fund) in the debt fund segment. Their portfolio quality is better and the current timing is also attractive. Because of the rate hikes, yields are up. There is room for a little more, but mostly the yields are priced in. Mutual fund managers are bullish on the three to five year segment and hence we are seeing a lot of passive debt funds coming in that segment. AMCs want to be present in all these lucrative maturity segments from 2025-2029,” says Joydeep Sen, Author and Corporate trainer.

Mutual fund advisors say that as the interest rates continue to increase, many investors want to move from low duration portfolios to mid duration portfolios, where the returns are predictable and possibly higher. “There are a couple of factors that give comfort to debt fund investors when it comes to SDL Funds. It comes with a portfolio which has a fixed maturity and all investments are in State Development Loans where there is hardly any credit risk. At the same time, they are not closed-ended which gives investors the option to exit and enter at any point if there are any liquidity needs,” says Harshad Chetanwala, Founder, My Wealth Growth, an investment management firm, based in Mumbai.

There is not a lot of awareness about these passive debt funds among retail investors. Since the category is new and evolving, experts believe that retail investors should keep it very simple. These schemes, they say, are ideal for retail investors because of their low maintenance and low risk.


“I would suggest investors to invest in line with their investment horizon. If you have a five-year horizon, you can pick an SDL scheme maturing in 2027 or 2025. The portfolio quality in TMFs is good and hence investors don’t need to worry about the portfolio. Also, because this is a new category of passive funds, the track record doesn’t matter much. Look for an AMC that you are comfortable with and invest in line with your investment horizon. Important to look at the expense ratio also, lower the better in a passive fund,” suggests Joydeep Sen.