Gilt with 10 year constant duration

Gilt with 10-Year Constant Duration Funds are best suited for long-term investors with a high tolerance for interest rate volatility who seek pure-play exposure to government securities. These investors must be willing to commit their investments for at least 5 to 10 years to reap the full benefits of long-duration fixed-income instruments.

They are appealing to investors who have a definite opinion that interest rates will fall over the long haul or those who look for an asset that exhibits different behavior from equities and short-term debt instruments, thus, providing more diversification to their broader portfolio.

Such funds are not exposed to any risk of credit, as their only source of investments are government bonds. The most significant risk associated with these funds is interest rate risk. Since the duration is consistently around 10 years, even small changes in interest rates can lead to substantial fluctuations in NAV.

In a scenario of falling interest rates, Gilt with 10-Year Constant Duration Funds can outperform most other debt funds due to the sharp appreciation in bond prices. On the other hand, in a rising rate environment, they may see notable capital losses in the short term.

These funds have provided returns between 6.5% and 9% each year. The exact returns depend on the overall economy and the RBI's monetary policy.

Credit safety is the main advantage of these funds as they only put their money in government securities. The constant duration approach guarantees that the fund is still in line with the long-term trend of interest rates without making too many changes in the period of time covered.

This fund also serves as a strong hedge against economic slowdown, as interest rates are often cut to stimulate growth, which can lead to strong bond performance. For seasoned debt investors or those building a strategic long-term fixed income allocation, this fund provides predictability and duration-based performance.

• High duration equals high volatility: Be mentally and financially prepared for short-term fluctuations in NAV.
• No credit risk, but high interest rate risk.
• It is not meant for short-term needs or conservative investors seeking capital stability.
• Ideal during the start or middle of a rate-cut cycle, when long-term bonds perform the best.

A minimum 5-year holding period is strongly recommended for optimal results.