Debt: Gilt with 10 year Constant Duration

What is it?

GILT with 10-year constant duration funds invest in Gsec securities having a Macaulay duration of 10 years. According to the SEBI guidelines, these funds must invest a minimum of 80% in such securities

Objective

The objective of the fund is to generate stable returns over a long period of time. These funds aim to generate relatively stable returns in changing interest rate scenarios.

Suitability and opinion

These funds are best suitable for conservative investors aiming to generate stable cash flows over a long period of time. These funds have virtually zero risk of default as they invest in bonds that are issued by the government. But these funds may have high volatility in response to changes in interest rates. We believe that investors can avoid this category altogether and can invest in liquid funds and short-duration funds for the debt allocation of their portfolios. We feel that there are too many debt fund categories available based on the tenure and types of bonds. This leads to more confusion and does not add any value to retail investors.