3 Debt Funds Whose Returns Have Beaten Bank FDs

Bank interest rates have fallen in the last few years and larger government owned banks are offering you an interest rate of 5.5% at the maximum. Some of the larger private sector banks too are offering similar interest rates. At such a time it is good to look for other options. While we are not recommending the below funds, we are just providing information that these funds have performed well over the last 1 to 3 years.

ICICI Prudential Bond Fund

This fund has generated a returns of 8.05% in the last 1 year, while the three year returns have been 9%. The funds investment is in extremely secure investments like Governemnt of India Securities, Uttar Pradesh State Development Loan, State Bank of India Bonds etc. In fact, almost 26% of the portfolio is in Government of India Securities.

The Assets Under Management of the fund is nearly Rs 4,000 crores. While the track record of this debt fund is good, returns are largely determined by the movement of interest rates in the country. We believe that interest rates in the country would hold at the current levels at least for a few more quarters. This fund has a 4-star rating from Crisil, which is reasonably good.

 

HDFC Medium Term Debt Fund

HDFC Medium Term Debt Fund has generated a returns of 9.77% and a 3-year returns of 8.22%. The fund has been rated 4-star by Crisil. The fund has holdings in 9.65% Green Infra Wind Energy, Government of India Securities, Muthoot Finance Debentures, Shriram City Union Finance etc.

The portfolio we would say is not as safe as ICICI Prudential Bond Fund, which has a higher portfolio accorded to Government of India Securities. If you are looking to invest you can do so with a sum of Rs 5,000. The net asset value of the fund under the growth plan is Rs 43.84. The fund also has an option for dividend payout, which is another good option for people who are looking at regular income.

 

Axis Strategic Bond Fund

This is another long term bond fund, which has done well in terms of returns in the more short term. In fact, the fund has generated a returns of 9.16% in the last 1 year and 8% returns in the last 3 years. Future returns are almost always uncertain, though we believe that interest rates in India are unlikely to move either way too quickly.

This fund has been rated 4-star by both CRISIL and Value Research. Almost 25% of the portfolio is in Government of India securities or companies majority owned by the Government of India. This makes the portfolio of the fund exceedingly strong. Overall, this fund looks pretty decent for those looking to invest even for a more shorter term duration of three years.

 

About the author:

Sunil Fernandes has spent 26 years covering business and finance in India and abroad. Sunil has worked with frontline daily newspapers including Hindustan Times, Deccan Herald and Gulf Times. He has also worked with investment magazines like Dalal Street Investment Journal and Oman Economic Review. His forte remains stocks, mutual funds and tax planning