SBI Corporate Bond Fund

The Corporate Bond Fund SBI invests in debt instruments such as government bonds and corporate bonds of well-established companies. Investors with a moderate risk appetite can opt for Corporate Bond Fund SBI. The bond market is less volatile and more stable compared to its equity counterpart. The bond market is calculated in terms of the yield curve, and market corrections are not as steep as the stock market.

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The Corporate Bond Fund SBI is available in India's open market stock exchanges, such as the National Stock Exchange and Bombay Stock Exchange. The Corporate Bond Fund SBI comes in four variants as given below.

  • SBI Corporate Bond Fund-Growth 
  • SBI Corporate Bond Fund-Growth IDCW
  • SBI Corporate Bond Fund-Regular 
  • SBI Corporate Bond Fund-Regular IDCW

The fund house has recently renamed its dividend plan IDCW, which stands for Income Distribution cum Withdrawal Plan. The IDCW provides an option for the investors to derive income or Withdrawal a percentage of their capital from the bond investment. It can be monthly or quarterly and is available in both options for each type.

The Corporate Bond Fund SBI IDCW Plan is further categorized as monthly and quarterly IDCW in accordance with the frequency of the dividend payouts. The Corporate Bond Fund SBI is headed by a seasoned fund manager with several years of experience managing bond funds. The fund houses across the globe prefer bond and debt instruments to hedge against rising inflation and market fluctuations. The Corporate Bond Fund SBI invests only in bonds rated AA+ and above, such as state government bonds, bonds in public sector units, etc.

Table: Investment Details

Parameter Details 
Fund Name SBI Corporate Bond Fund
Fund House SBI Mutual Fund
Launch Date January 16, 2019
Benchmark  NIFTY Corporate Bond Index
Type  Debt
Minimum Investment  Rs.500
Lock-in Period  No
Entry Load Not Applicable
Exit load  For exit on or before 6 months of allotment:
  • For 4% investments: NIL
  • For remaining investment: 1%
For exit after 6 months: NIL
Return Performance  Moderate
Fund Consistency  Moderate
Risk Level Moderate

Investment Objective

The Corporate Bond Fund SBI invests heavily in high-quality corporate debt securities and other money market instruments. The main goal of the bond fund is to generate moderate returns better than fixed deposits such that a paltry sum of Rs.10,000 invested for a year would have become Rs.10,594.Investors who are risk-averse but need higher returns can choose to purchase Corporate Bond Fund SBI. The fund managers ensure the liquidity of the fund to provide hassle-free redemption for investors. The fund house ensures adequate returns for its investors by spreading its capital across various investment instruments. The fund is benchmarked to NIFTY Corporate Bond TRI indices and generates returns equivalent to the earlier mentioned indices. 

The fund generates attractive returns with its diversified holdings across various bond markets. The investor must analyse the risk of his capital loss before choosing the bond fund. The performance of the bond fund will rely heavily on the company’s ability to assess the financial conditions of the bond issuers concerning their debt payments. The fund house has invested its portion of its cash in primary and secondary markets to minimize credit risk.

Fund Summary

  1. SBI Corporate Bond Fund-Direct Growth

    • Risk level- Moderate
    • NAV- 12.36 as of May 24 2021
    • Expense Ratio-0.34%
    • Fund Started-21 January 2019
  2. SBI Corporate Bond Fund-Direct-IDCW

    • Risk level-Moderate 
    • NAV-11.66 as of May 24 2021
    • Expense Ratio-0.34%
    • Fund Started-21 January 2019
  3. SBI Corporate Bond Fund-Regular Growth

    • Risk level-Moderate
    • NAV-12.21 as of May 24 2021
    • Expense Ratio-0.81%
    • Fund Started-21 January 2019
  4. SBI Corporate Bond Fund-Regular IDCW

    • Risk level-Moderate
    • NAV-11.53 as of May 24 2021
    • Expense Ratio-0.81%
    • Fund Started-21 January 2021,

Fund Returns Summary

SBI Corporate Bond Fund-Direct Growth Returns

Time-Period Returns Per Year(Annualized)
6 Months 1.51%
One year 6.51%
Three years 9.60%
Five years NA
10-years NA

SBI Corporate Bond Fund-Direct-IDCW Returns

Time Period Returns Per Year(Annualized)
6 Months 1.51%
One year 6.51%
Three years 9.60%
Five years NA
10-years NA

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

SBI Corporate Bond Fund-Regular Growth Returns

Time Period Returns Per Year(Annualized)
6 Months 1.51%
One year 6.51%
Three years 9.60%
Five years NA
10-years NA

SBI Corporate Bond Fund-Regular IDCW Returns

Time Period Returns Per Year(Annualized)
6 Months 1.51%
One year 6.51%
Three years 9.60%
Five years NA
10-years NA

Summative Pros and Constable

Pros Cons
Exit load is Zero The asset under management is greater than Rs.20,000 crores resulting in lower returns.
A lower expense ratio of 0.34% The fund is relatively new.
Provides returns greater than bank fixed deposits The age of the fund is less than 5 years
High-quality debt structures One year returns are lower than average returns
Less Volatility compared to equities Returns are lesser than equities
Provides regular income for the investors  Liquidity risk needs to be mitigated

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Benefits of SBI Corporate Bond Fund

The Corporate Bond Fund SBI provides moderate returns for its investors. It is best-suited for those with a conservative mindset. Investors with a portfolio can allocate some percentage of their capital to the bond fund to hedge and mitigate risk during market corrections and fluctuations, limiting capital loss. Some of the benefits of Corporate Bond Fund SBI are as follows.

Balancing the Risk- factors-The fund house ensures that only Corporate bonds with AA+ ratings are cherry-picked for investment. The ratings ensure the company's strength against various risk factors such as its ability to sell securities, trading volumes and settlement periods, market risk, interest rate risk, liquidity risk, default risk, reinvestment risk etc. The corporate bond fund also comes with other risks such as interest rate futures, ADR/GDR and Foreign Securities, repo transactions in corporate debt securities.

Reliability- The amateur investor with a limited understanding of the bond market and debt securities can save themselves by purchasing the Corporate bond fund managed by a good fund house. The average retail investor needs years of experience and plenty of knowledge to dive into the bond market, which is well-known for its risk factors. The SBI Corporate bond fund is known for its reliability because of its choice of bond holdings and the criteria it picks for the companies issuing bond securities.

Spreading the investments-The SBI Corporate fund is best known for its asset allocation strategy. The fund house invests in various debt securities and across a variety of sectors issuing their respective bonds. The strategy employed to allocate the investors capital results in successful risk mitigation carefully. The asset allocation ensures the returns are consistent despite the market fluctuations. The asset-allocation strategy is a proven one in arresting the downside by a significant percentage during market corrections. The corporate bond serves the purpose of hedging during uncertainty. The fund house has a team for risk management along with the board of committee for analysing the risk judiciously.

Path to financial goal-The SBI corporate bond generates returns higher than the savings and fixed deposits of popular financial institutions across the globe. An investor with a moderate risk appetite can accumulate significant corpus in his kitty. The wealth accumulated can be used for personal purposes such as starting a business, financing children's milestones such as their school education, college education, post-graduation, marriage, or even fundraising their entrepreneurial aspirations.

A wide range of bond holdings-The fund sustains by creating a stable portfolio for its customers. The fund has several holdings in well-known companies such as Reliance Ltd, National Thermal Power Corporation, etc. The fund house has allocated more than 45% of its holdings in debentures, 19% of its holdings in Non-Convertible debentures, 9% of its total cash is in Repo, around 7% in additional tier 2 bonds, over 6% is safely invested in Government of India securities, 2% of its total cash is invested in Central Government Loans while the rest of the capital is held in cash and zero-coupon bonds.

Investor-Centric options-The SBI corporate fund offers plenty of investment-friendly options for its customers, encouraging them to build wealth according to their temperament and behaviour. The fund house provides plans such as SIP, which stands for Systematic Investment Plan, where the investors can deposit money and buy units on a monthly, quarterly, half-yearly and yearly basis according to their convenience. The SIP enables the investors to average out their investments without many losses. In some market scenarios, the SIP plan has yielded higher returns to the investors compared to the counterparts who invested in a lump sum.

Who Should Invest in SBI Corporate Fund?

The SBI corporate bond fund recommends the investors hold their investments for a minimum tenure of three years. The corporate bond fund is for those who are seeking:

  1. Generating Moderate Returns

    The fund generates ample returns if held longer. Since the fund's inception, the annualised returns are close to 10%, which is almost on par with the equities market returns. The fund helps investors with calmness to produce a massive corpus of wealth in a more extended period.

  2. Risk-Averse Investors

    The corporate bond fund is suitable for investors with a conservative attitude. The corporate bond fund provides decent returns annually irrespective of the market chaos and economic conditions. The bond market yields higher returns during an inflationary financial situation and supports the investors with the rising prices. The correct percentage of investment in bonds can prevent capital losses and hedge against uncertain times such as war and natural disasters.

Conclusion

The SBI corporate bond fund has a proven track record when it comes to portfolio performance and market returns. The fund has rightly analysed the risks involved in the bond market and has picked corporate bonds with caution. The fund managers ensure that the investors are served with higher than expected returns bearing the market's volatility.

Faqs

  • Q: How is the NAV calculated?

    Ans: The NAV, which stands for net asset value, is calculated by using the current value of the mutual fund holdings at the end of the trading day, followed by subtracting the expenses and dividing the value by the number of units issued to date.
  • Q: What is the procedure to redeem the fund?

    Ans: The investors can redeem the units by visiting the official website of the fund house and placing a redeem request online.
  • Q: What is the meaning of SWP?

    Ans: The SWP stands for Systematic Withdrawal Plan, which offers the investors to redeem their units on a timely basis. The SWP can be used as a source of income for the investor.
  • Q: Are there any tax benefits for the investors?

    Ans: There are no tax benefits, but the investors will benefit from the indexation of long term capital gains.
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