The Hindu Business Line : Deutsche MF unveils intl bond fund

DEUTSCHE Mutual Fund has lined up its first scheme aimed at investing partially in overseas debt. It has mooted a close-ended product that will try to generate regular returns by investing in fixed income paper normally maturing in line with the time profile of the scheme.

The proposed Deutsche International Bond Fund, which will have the Crisil Bond Fund Index as its benchmark, will have a duration of five years from the date of allotment. The fund will be listed on a stock exchange within six months of closure of the IPO.

Under ordinary circumstances, at least 65 per cent of the assets will be allocated to domestic and foreign debt, which may go up to 100 per cent if necessary. A ceiling of 35 per cent has been fixed for allocations to money market instruments and cash, the offer document sent to the SEBI for approval has mentioned. Mr Suresh Soni has been named as the fund manager.

The scheme will invest in Triple-A securities, said Mr Sandeep Dasgupta, CEO of Deutsche MF, adding that the portfolio will include securitised paper as well. "We are looking at securities of companies operating in the US and European markets. Our overseas offices will help us identify the instruments and in research. This will be a specialised product, which investors must particularly understand," he hold Business Line.

The offer document also refers to certain specific risk factors, which investors need to bear in mind. The scheme, for instance, will invest partly in foreign securities, as permitted by the regulator from time to time. Trading volumes, settlement periods and transfer procedures may well restrict the liquidity of such investments. Further, the scheme may use derivative and hedging products with a view to protect the value of its portfolio.

Since a part of the assets will be invested in securities denominated in foreign currencies, the rupee equivalent of the net assets (as well as distributions and income) may be adversely affected by changes in the values of such currencies. Moreover, in the event of downgrading of sovereign credit ratings, the scheme may be affected.