Short-term debt funds give best returns among debt schemes: Report

Birla Sun Life and UTI lead Crisil MF Rankings for the March quarter

Short-term schemes have delivered the highest returns among debt funds, says a CRISIL report. According to the report, elevated interest rates during the past three years have inverted the thesis that long-term investments yield higher than short-term ones.

During the period, yields on 10-year government security increased from 7.98 per cent to 8.80 per cent, peaking at 9.23 per cent in December 2013. On the other hand, the one-year certificate of deposit yielded 9.37 per cent on an average over the same period, helping short-term debt schemes which typically, follow an accrual strategy in times of rising interest rates. Long-term debt funds, on the other hand, were impacted by mark-to-market losses.

Debt funds are represented by four unique indices - CRISIL-AMFI Short-Term Debt Fund Performance Index, CRISIL-AMFI Money Market Fund Performance Index, CRISIL-AMFI Income Fund Performance Index and CRISIL-AMFI Gilt Fund Performance Index. In the three-year period, returns from short-term categories were higher by 1.5 per cent at 3.1 per cent, with money market funds delivering the most. For the March quarter, Birla Sun Life Mutual Fund and UTI Mutual Fund led the tally by having seven funds under CRISIL Fund Rank 1, followed by ICICI Prudential Mutual Fund with six and SBI Mutual Fund with five.