This first open-ended 100 per cent debt fund which opened on May 4 will also be the first scheme of UTI to declare a daily NAV with effect from July 18, 1998. Basu, however, preferred not to disclose when the other schemes of the UTI would start declaring daily NAVs.

Talking about the investment strategy for the new debt scheme, Basu stated that bulk of these funds would be earmarked for rated corporate debentures (AAA, AA and A-rated). The balance would be invested in government securities and money market instruments. Basu said UTI had ready expertise to manage debt funds as nearly 50 per cent of its investible funds was in fixed income instruments which amounts to nearly Rs30,000 crore at present.

The fund's strategy would be to balance safety and yield considerations so that the average yield to the investors worked out to around 14.5 per cent, he added. He pointed out that the AMC had an internal set-up to rate instruments independent of the ratings done by established rating agencies.

Basu disclosed that the fund, which will become open ended from July 18, 1998, is targeting an initial corpus of Rs 150 crore plus and will provide investors the benefit of capital gains with indexation benefits. Unlike debentures, the rate of return on the units is not predetermined and the rate of 20 per cent would apply with the cost of acquisition going up by around 6 per cent annually.

Besides, the scheme provides that initial issues expenses would not be charged to the fund and initial subscription would be fully available for investment. Sale and repurchase would be at NAV, which means that there would be no entry and exit load. However, to discourage repurchase requests in thefirst year, there would be a sales charge of 1.5 per cent.