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Six debt funds that beat bank fixed deposits and made retirees happy over the last 15 years

For retirees, given the low interest rates on deposits, quality debt funds can help in beating inflation

November 10, 2021 / 10:51 AM IST
Intro
Debt funds play an important part in stabilizing our investment portfolios. They help us de-risk our holdings.  Despite bitter episodes surrounding credit risk funds, many other bond scheme categories have done well over the long term. For retirees, given the low interest rates on deposits, quality debt funds can help in beating inflation. Those nearing retirement can also shift their investments in volatile assets to relatively low-risk debt mutual funds. Here are the top debt funds that outperformed bank fixed deposits over the long run. For this study, we considered only debt schemes with a minimum of a 15-year track record. We checked their volatility and downside protection as well.
Aditya Birla SL Short Term (ABST) tops the chart. Its solid performance is attributed to its relatively higher exposure to AA related bonds. Since its launch, ABST has been investing in the short-term  papers including corporate debts, commercial papers and certificates of deposits with its portfolio average maturity of up to 5.7 years. After the re-categorization exercise in 2018, ABST is designated as a short duration fund. The fund had a miniscule exposure to the bonds issued by the distressed companies IL&FS and Dewan Housing Finance.
Aditya Birla SL Short Term (ABST) tops the chart. Its solid performance is attributed to its relatively higher exposure to AA related bonds. Since its launch, ABST has been investing in the short-term  papers including corporate debts, commercial papers and certificates of deposits with its portfolio average maturity of up to 5.7 years. After the re-categorization exercise in 2018, ABST is designated as a short duration fund. The fund had a miniscule exposure to the bonds issued by the distressed companies IL&FS and Dewan Housing Finance.
Belonging to the short duration category, ICICI Prudential Short Term Fund has delivered compounded average five-year return of 8.6 percent in the last 10 years. It has maintained its portfolio average maturity ranging 1.2-4.8 years over the last 10 years. More than 80% of the assets has been ever invested in the highest rated debt instruments.
Belonging to the short duration category, ICICI Prudential Short Term Fund has delivered compounded average five-year return of 8.6 percent in the last 10 years. It has maintained its portfolio average maturity ranging 1.2-4.8 years over the last 10 years. More than 80% of the assets has been ever invested in the highest rated debt instruments.
Formerly called HDFC High Interest Fund, HDFC Medium Term Debt Fund has managed to maintain its portfolio average maturity between 1.8-6.3 years over the last 10 years. Currently, it is categorised as medium duration funds and invests in debt instruments such that the Macaulay duration of the portfolio is between 3-4 years. One fourth of the portfolio has been ever invested in the bonds rated AA/AA-.
Formerly called HDFC High Interest Fund, HDFC Medium Term Debt Fund has managed to maintain its portfolio average maturity between 1.8-6.3 years over the last 10 years. Currently, it is categorised as medium duration funds and invests in debt instruments such that the Macaulay duration of the portfolio is between 3-4 years. One fourth of the portfolio has been ever invested in the bonds rated AA/AA-.
Formerly known as the IDFC Super Saver Income Fund – Medium Term Plan, IDFC Bond Fund – Medium Term Plan has been a consistent performer in the medium duration funds category. It is one of the few duration oriented funds that managed to allocate to only the highest rated papers over the last six years. Its portfolio average maturity ranges from 1.7-4.9 years over the last 10 years.
Formerly known as the IDFC Super Saver Income Fund – Medium Term Plan, IDFC Bond Fund – Medium Term Plan has been a consistent performer in the medium duration funds category. It is one of the few duration oriented funds that managed to allocate to only the highest rated papers over the last six years. Its portfolio average maturity ranges from 1.7-4.9 years over the last 10 years.
Earlier called Reliance Short Term Fund, Nippon India Short Term Fund has managed to invest at least 90% in the highest rated debt papers after the re-categorization in 2018. It manages the lower portfolio average maturity, ranging from 1.5-3.3 years over the last 10 years.
Earlier called Reliance Short Term Fund, Nippon India Short Term Fund has managed to invest at least 90% in the highest rated debt papers after the re-categorization in 2018. It manages the lower portfolio average maturity, ranging from 1.5-3.3 years over the last 10 years.
Kotak Bond Short Term Fund has been managing a conservative portfolio by holding only the highest rated papers over the last six years. Its portfolio average maturity ranges from 1.1-4 years over the last 10 years.
Kotak Bond Short Term Fund has been managing a conservative portfolio by holding only the highest rated papers over the last six years. Its portfolio average maturity ranges from 1.1-4 years over the last 10 years.
These funds are not our recommendations. They are based on past return and risk analysis. Only Kotak Bond Short Term Fund is part of MC30, Moneycontrol’s curated basket of 30 top MF schemes. If you wish to invest today for your future financial goals, refer to the MC30. We have stuck to three categories: short-term, corporate bond and Banking & PSU Debt funds. In our opinion, these are suitable for all types of investors.
These funds are not our recommendations. They are based on past return and risk analysis. Only Kotak Bond Short Term Fund is part of MC30, Moneycontrol’s curated basket of 30 top MF schemes. If you wish to invest today for your future financial goals, refer to the MC30. We have stuck to three categories: short-term, corporate bond and Banking & PSU Debt funds. In our opinion, these are suitable for all types of investors.
Dhuraivel Gunasekaran
first published: Nov 10, 2021 09:31 am

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