Debt Schemes

Dynamic Bond funds alter the tenor of the securities in the portfolio in line with expectation on interest rates. The tenor is increased if interest rates are expected to go down and vice versa.

Short-Term Debt Funds

The primary focus of short-term debt funds is coupon income. Short term debt funds have to also be evaluated for the credit risk they may take to earn higher coupon income. The tenor of the securities will define the return and risk of the fund.

• Funds holding securities with lower tenors have lower risk and lower return.
• Liquid funds invest in securities with not more than 91 days to maturity.
• Ultra Short-Term Debt Funds hold a portfolio with a slightly higher tenor to earn higher coupon income.
• Short-Term Fund combine coupon income earned from a pre-dominantly short-term debt portfolio with some exposure to longer term securities to benefit from appreciation in price.

Capital Protection Oriented Funds

Capital Protection Oriented Funds are close-ended hybrid funds that create a portfolio of debt instruments and equity derivatives.

• The portfolio is structured to provide capital protection and is rated by a credit rating agency on its ability to do so. The rating is reviewed every quarter.
• The debt component of the portfolio has to be invested in instruments with the highest investment grade rating.
• A portion of the amount brought in by the investors is invested in debt instruments that is expected to mature to the par value of the capital invested by investors into the fund. The capital is thus protected.
• The remaining portion of the funds is used to invest in equity derivatives to generate higher returns.