Ideal for long-term investors with higher risk appetite

Long-duration funds (LDFs) delivered an average return of 11.4 per cent in the year ending November 27, 2024.

- SARBAJEET K SEN

New fund offers for LDFs from Franklin India and Mirae Asset are currently open for subscription.

The yield of 10-year government securities (G-Sec) has eased over the past year from 7.1 per cent to 6.8 per cent. "Since yields/interest rates and bond prices move inversely, it has added to the mark-to-market (MTM) component of returns of long-duration funds. Being long-duration, a high 'modified duration' acts as a multiplier on yield movements, and has a high impact on prices," says Joydeep Sen, corporate trainer and author.

Accrual gains have been another driver of returns. "Alongside MTM gains, these funds also earned income from the interest accrued on their bond investments. This combination of steady interest income and capital gains has been a significant driver of these funds' strong returns," says Sirshendu Basu, head-products, Bandhan Asset Management Company (AMC).