BEST DEBT FUNDS

Focus on portfolio mix, duration and AAA and AA rated assets helped the best performers deliver impressive returns.

- ARNIKA THAKUR

1 ULTRA-SHORT DURATION FUNDS

ULTRA-SHORT duration funds, which include categories such as ultra-short duration, low duration and money market funds, are ideal for risk-averse, short-term investors. The top-performing fund in the category — Nippon India Money Market Gr — had rolling returns of 4.89% (as on September 30, 2023). Maintaining a conservative duration of 120-180 days (money market funds can invest in assets with maximum maturity of up to one year), and a healthy balance between asset quality and carry (direct cost paid by an investor to maintain a security position) played out well for the fund this year.

“The discipline of maintaining duration in a range has also helped the fund perform in a volatile interest rate scenario,” says Anju Chhajer, senior fund manager, fixed income, Nippon India Mutual Fund. In terms of asset quality, 60-70% of the fund’s portfolio was invested in issuers rated long-term AAA and AA+, while 15-25% was in sovereign instruments. “This is an all-weather fund, which works in all the market scenarios — especially for investment time horizons of two-six months,” adds Chhajer.