Investors can lock into current high yields with target maturity funds

The medium- to high-maturity variety of these funds can also offer capital gains if interest rates fall

Interest rates, which are currently at or near peak levels, are expected to head south in the second half of 2024. Investors can use target maturity funds (TMFs) to lock into current attractive yields or make capital gains.

“We expect central banks to start easing from mid-2024. This could be a good time to lock in yields by investing in TMFs,” says Kaustubh Gupta, co-head of fixed income, Aditya Birla Sun Life Asset Management Company (AMC).

Arun Kumar, vice-president and head of research, FundsIndia, concurs. “Debt fund returns improve when interest rates fall and vice-versa. TMFs maturing in more than