Majority of the commercial banks over the last one month have reduced their savings account rates by 0.50 per cent. Even the returns from traditional investment avenues like fixed deposits are on a downtrend. At such times, debt mutual funds present an attractive alternative for investors who are looking for a stable source of income.
However, what is important is the type of debt fund any investir opts for. Within the mutual fund arena, there are a variety of debt mutual funds available. Therefore, it is advisable to seek the advice of an expert for making an investment choice, such that the fund chosen is in line with an investor’s risk appetite and investment tenure.
However, if the investment objective if for the long term, then opting for dynamically managed duration funds make a good case in the current market environment.
And within this category it is ICICI Prudential's long term Plan which has emerged as a winner, consistently over past several quarters. Over the last three years, the interest rate landscape has seen quite a few changes but this fund has managed to consistently stay ahead of the curve, thereby outperforming the benchmark by a wide margin.
Also, this is the only fund which is model based among the debt funds, thereby aiding the fund manager to be ahead of the curve.
Given that the fund is dynamically managed, the fund manager has the ability to change the duration strategy swiftly to match the market trend. The scheme is currently running a high duration as the factors such as lower current account, slow credit growth, lower inflation, high real interest rates and fiscal deficit are reflecting a positive case for moderation in interest rates from current levels.
The returns from the fund have been consistent over the long term as well. The fund has offered an average return of 11.3 per cent on three-year rolling returns basis over a period spanning over past 4 years.
Since inceptionthe fund has given anannualized return of 10.60 per cent as against the benchmark index giving 8.61 per cent. In effect, Rs 10,000 invested at inception would have grown to Rs 21,359 by 31 July 2017as compared to Rs 18,624 by the benchmark.
To conclude, this fund is ideal for the investors who are looking for better returns than the traditional investment avenues, at very moderate risk.
The fundhas thus farshowcased its potential to stay ahead of the market with its flexibility to modify duration and accrual strategy, as and when required.