Investors should make staggered investment in long-duration funds

Be, however, prepared for interim volatility and have a horizon of above five years

Sarbajeet K Sen
money, funds

Check the portfolio’s credit quality and the scheme’s expense ratio before investing

Should one consider investing in a long-duration fund (LDFs) at this juncture? That is the question many retail investors have been asking themselves vis-a-vis LDFs, a category that has been in the limelight over the past three months with four fund houses — HDFC, SBI, UTI, and Axis — launching their schemes. A glance at the category’s average return over the past year, a meagre 4.5 per cent, doesn’t offer much encouragement.
Investment approach
LDFs are debt schemes which, according to the Securities and Exchange Board of India, must invest in bonds so that the Macaulay Duration of the portfolio remains above seven years. The regulator hasn't imposed any restrictions in terms of the credit quality of bonds. Most LDFs invest in government securities or in bonds having high credit ratings.

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First Published: Mar 16 2023 | 8:39 PM IST

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