Debt: Ultra Short Duration

What is it?

Ultra-short duration debt funds invest in debt & money market instruments with a weighted average maturity (Macaulay duration) between 3 to 6 months.

Objective

The objective of these funds is to provide better risk-adjusted returns compared to risk-free options in a similar duration. These funds will provide better returns than FDs and savings accounts while taking lower risks compared to equity markets.

Suitability and opinion

These funds are ideal for investors with a low-risk appetite planning to reach a short-term goal within six months. These funds aim to generate slightly better returns compared to bank FDs of similar tenure. The risk is very low in this category. But we believe that investors can avoid investing in this fund and invest in liquid funds if they want to park their money for up to 1 year. We feel this because debt funds have different categories even in the shorter time duration and this differentiation does not add any value to retail investors.