Debt: Long Duration

What is it?

Long-duration debt funds invest in debt & money market instruments with a weighted average maturity (Macaulay duration) greater than 7 years.

Objective

The objective of these funds is to generate stable returns over the long term. The long-duration debt funds will provide FD-like returns with very low volatility.

Suitability and opinion

These funds are suitable for risk-averse investors who are seeking to generate stable returns over a long period and for aggressive investors looking to diversify some portion of their portfolio into stable assets. We believe that these funds have a far lower risk compared to equity funds but their prices can fluctuate a lot if interest rates change. We feel that investors can avoid investing in this category and opt for short-duration debt funds if they want some debt exposure in their portfolio. This category has been adversely affected by the government's decision to remove indexation benefits.