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Debt Funds

Mutual Funds
  • A debt fund (also known as income fund) is a fund that invests primarily in bonds or other debt securities.
  • Debt funds invest in short and long-term securities issued by government, public financial institutions, companies
    • Treasury bills, Government Securities, Debentures, Commercial paper, Certificates of Deposit and others
  • Debt funds can be categorized based on the tenor of the securities held in the portfolio and/or on the basis of the issuers of the securities or their fund management strategies, such as
    • Short-term funds, Medium-term funds, Long-term funds
    • Gilt fund, Treasury fund, Corporate bond fund, Infrastructure debt fund
  • Floating rate funds, Dynamic Bond funds, Fixed Maturity Plans
  • Debt funds have potential for income generation and capital preservation

Debt Fund Categories:

Overnight Fund Overnight securities having maturity of 1 day
Liquid Fund Debt and money market securities with maturity of upto 91 days only
Ultra Short Duration Fund Debt & Money Market instruments with Macaulay duration of the portfolio between 3 months – 6 months
Low Duration Fund Investment in Debt & Money Market instruments with Macaulay duration portfolio between 6 months- 12 months
Money Market Fund Investment in Money Market instruments having maturity upto 1 Year
Short Duration Fund Investment in Debt & Money Market instruments with Macaulay duration of the portfolio between 1 year – 3 years
Medium Duration Fund Investment in Debt & Money Market instruments with Macaulay duration of portfolio between 3 years – 4 years
Medium to Long Duration Fund Investment in Debt & Money Market instruments with Macaulay duration of the portfolio between 4 – 7 years
Long Duration Fund Investment in Debt & Money Market Instruments with Macaulay duration of the portfolio greater than 7 years
Dynamic Bond Investment across duration
Corporate Bond Fund Minimum 80% investment in corporate bonds only in AA+ and above rated corporate bonds
Credit Risk Fund Minimum 65% investment in corporate bonds, only in AA and below rated corporate bonds
Banking and PSU Fund Minimum 80% in Debt instruments of banks, Public Sector Undertakings, Public Financial Institutions and Municipal Bonds
Gilt Fund Minimum 80% in G-secs, across maturity
Gilt Fund with 10 year constant Duration Minimum 80% in G-secs, such that the Macaulay duration of the portfolio is equal to 10 years
Floater Fund Minimum 65% in floating rate instruments (including fixed rate instruments converted to floating rate exposures using swaps/ derivatives)