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Aditya Birla Sun Life AMC Limited

Aditya Birla Sun Life AMC Limited

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    Debt Funds

    A debt mutual fund invests in a mix of debt investments such as treasury bills, government securities (G-Sec), corporate bonds and other money market instruments of varying maturities. Debt funds are less volatile and, hence, are less risky than equity funds. Debt mutual funds seek to provide investors capital preservation and regular income. There are various types and categories of debt funds available for catering to different time horizon as well as liquidity preference of investors.

    Also read:- What are Debt Funds?


    REG-G
    • Saving
    • Debt - Floater Fund

    8.02 %

    Annualized Returns

    AUM:

    ₹ 13141.87 Cr

    NAV:

    ₹ 331.51

    Exit Load Duration:

    NIL
    Start SIP
    Lumpsum

    REG-G
    • Saving
    • Debt - Money Market Fund

    7.75 %

    Annualized Returns

    AUM:

    ₹ 26348.13 Cr

    NAV:

    ₹ 353.17

    Exit Load Duration:

    NIL
    Start SIP
    Lumpsum

    REG-G
    • Saving
    • Debt - Ultra Short Duration Fund

    7.73 %

    Annualized Returns

    popper 2
    Lac + Investor and Counting

    AUM:

    ₹ 15097.98 Cr

    NAV:

    ₹ 522.99

    Exit Load Duration:

    NIL
    Start SIP
    Lumpsum

    REG-G
    • Saving
    • Debt - Corporate Bond Fund

    8.67 %

    Annualized Returns

    Lac + Investor and Counting
     3
    popper

    AUM:

    ₹ 23336.78 Cr

    NAV:

    ₹ 107.19

    Exit Load Duration:

    NIL
    Start SIP
    Lumpsum

    REG-G
    • Saving
    • Debt - Low Duration

    7.15 %

    Annualized Returns

    popper 5
    Lac + Investor and Counting

    AUM:

    ₹ 11235.01 Cr

    NAV:

    ₹ 627.98

    Exit Load Duration:

    NIL
    Start SIP
    Lumpsum

    REG-G
    • Saving
    • Debt - Index Fund

    7.38 %

    Annualized Returns

    popper 4
    Lac + Investor and Counting

    AUM:

    ₹ 48377.19 Cr

    NAV:

    ₹ 403.51

    Exit Load Duration:

    7 D
    img

    Investor Exit upon subscription (Exit load as % of redemption) - Day 1 - 0.0070%,
    Day 2 - 0.0065%,
    Day 3 - 0.0060%,
    Day 4 - 0.0055%,
    Day 5 - 0.0050%,
    Day 6 - 0.0045%,
    Day 7 Onwards - 0.0000%

    Start SIP
    Lumpsum

    REG-G
    • Saving
    • Debt - Long Duration

    10.70 %

    Annualized Returns

    AUM:

    ₹ 157.16 Cr

    NAV:

    ₹ 12.17

    Exit Load Duration:

    NIL
    Start SIP
    Lumpsum

    REG-G
    • Saving
    • Debt - Credit Risk Fund

    11.88 %

    Annualized Returns

    AUM:

    ₹ 936 Cr

    NAV:

    ₹ 20.37

    Exit Load Duration:

    2 Y
    img

    In respect of each purchase / switch-in of Units, upto 15% of the units may be redeemed / switched out without any exit load from the date of allotment.
    Any redemption in excess of the above limit shall be subject to the following exit load:
    • For redemption / switch-out of units on or before 1 year from the date of allotment - 3.00% of applicable NAV.
    • For redemption / switch-out of units after 1 year but on or before 2 years from the date of allotment - 2.00% of applicable NAV.
    • For redemption / switch-out of units after 2 year but on or before 3 years from the date of allotment - 1.00% of applicable NAV.
    • For redemption / switch-out of units after 3 years - Nil

    Start SIP
    Lumpsum

    REG-G
    • Saving
    • Debt - Gilt Fund

    9.58 %

    Annualized Returns

    AUM:

    ₹ 2304.31 Cr

    NAV:

    ₹ 77.63

    Exit Load Duration:

    NIL
    Start SIP
    Lumpsum

    REG-G
    • Saving
    • Debt - Short Duration

    8.04 %

    Annualized Returns

    AUM:

    ₹ 8923.74 Cr

    NAV:

    ₹ 45.15

    Exit Load Duration:

    NIL
    Start SIP
    Lumpsum

    REG-G
    • Saving
    • Debt - Banking & PSU Fund

    8.03 %

    Annualized Returns

    AUM:

    ₹ 9506.51 Cr

    NAV:

    ₹ 348.41

    Exit Load Duration:

    NIL
    Start SIP
    Lumpsum

    REG-G
    • Saving
    • Debt - Overnight Fund

    6.62 %

    Annualized Returns

    AUM:

    ₹ 6478.45 Cr

    NAV:

    ₹ 1340.34

    Exit Load Duration:

    NIL
    Start SIP
    Lumpsum

    REG-G
    • Saving
    • Debt - Medium Duration

    10.43 %

    Annualized Returns

    AUM:

    ₹ 1968.18 Cr

    NAV:

    ₹ 36.83

    Exit Load Duration:

    1 Y
    img

    In respect of each purchase / switch-in of Units, upto 15% of the units may be redeemed / switched out without any exit load from the date of allotment.
    Any redemption in excess of the above limit shall be subject to the following exit load:
    - For redemption / switch-out of units on or before 1 year from the date of allotment: 2.00% of applicable NAV.
    - For redemption / switch-out of units after 1 year but on or before 2 years from the date of allotment: 1.00% of applicable NAV.
    - For redemption / switch-out of units after 2 years: Nil
    The Load Structure is subject to change from time to time and shall be implemented prospectively and will be calculated on First in First Out (FIFO) basis. For further details on Load Structure, please refer Part D of this Scheme Information Document.

    Start SIP
    Lumpsum

    REG-G
    • Saving
    • Debt - Dynamic Bond

    8.93 %

    Annualized Returns

    AUM:

    ₹ 1697.07 Cr

    NAV:

    ₹ 43.82

    Exit Load Duration:

    90 D
    img

    0.5%: For redemption / switch-out of units within 90 days from the date of allotment (% of applicable NAV) NIL : For redemption / switch-out of units after 90 days from the date of allotment

    Start SIP
    Lumpsum

    REG-G
    • Saving
    • Debt - Medium to Long Duration Fund

    8.75 %

    Annualized Returns

    AUM:

    ₹ 2181.01 Cr

    NAV:

    ₹ 119.59

    Exit Load Duration:

    NIL
    Start SIP
    Lumpsum

    What are the debt Mutual Fund?

    A debt fund is a type of mutual fund that primarily invests in a mix of fixed income debt instruments such as T-Bils, Government Securities (G-secs), Corporate Bonds and other market instruments of varying maturities which offer capital appreciation. Debt funds have pre-determined maturity dates and interest rates. There is a lower credit risk in debt funds because you are basically lending money to the government and companies. Debt mutual funds are less volatile and hence less risky. Debt mutual funds seek to provide investors capital preservation and regular income. There are various types and categories of debt funds available for catering to different time horizon as well as liquidity preference of investors.


    Why Should you Invest in Debt Funds?

    Debt mutual funds offer numerous advantages to investors.


    • High liquidity

    Debt funds are highly liquid and can be redeemed easily in case of a financial emergency by placing a simple redemption request. Since there is no lock-in period involved in debt funds, you can, you can convert them into cash very quickly.


    • Low-cost investment

    As per SEBI norms, the total expense ratio of a debt mutual fund cannot be more than 2% of the asset under management. Within the debt funds category, overnight and liquid funds are associated with notably low expense ratios, whereas dynamic and long-term funds come with higher expense ratios.


    • Hedge against volatility

    Debt funds are not much impacted by market volatility and hence can serve as an excellent hedge against market volatility and unpredictable market events.


    • Low portfolio risk

    Debt mutual funds carry lower portfolio risk and a strategic allocation can ensure stability to your investment portfolio. They are ideal for investors with low-risk appetite.

    Who Should Invest in Debt Mutual Funds?

    • Investors seeking Regular income:

      Debt funds that invest in high-quality bonds or keep durations low are ideal for risk-averse investors looking for steady income, such as retired persons.

    • Conservative or First-time mutual fund investors:

      Conservative or first-time mutual fund investors, who do not want to take on the risk of investing in equity funds, can consider short duration funds or corporate bond funds, as a replacement for bank fixed deposits. Along with liquidity and flexibility of withdrawal, the debt fund investment is likely to generate higher returns, especially when interest rates are declining.

    • Investors who want to purchase equity in a bearish market:

      Even an aggressive equity investor can benefit by combining a debt fund with a Systematic Transfer Plan (STP). For example, an STP from a debt fund to an equity fund will minimize average cost in a sideways or bearish market; because the STP will allow periodic transfers from the debt fund to purchase units of the equity fund.

    • Investors who want to park short-term funds:

      Households and businesses can deploy short-term surpluses in liquid or ultra-short duration funds rather than leave them in a bank deposit. An overnight or liquid fund can even hold household emergency funds while earning a modest return. Investors with a specific investment horizon can opt for an FMP.

    How Debt fund works?

    A debt instrument is a legal obligation where the borrower agrees to repay the principal loan amount along with interest to the lender on a timely basis. Debt funds invest in a mix of such debt instruments of various kinds. Debt funds derive their returns mainly from two sources: first, the interest earned on their investments in various debt instruments and second in form of capital gains generated by trading i.e. buying and selling debt securities in the secondary market.

    Types of Debt Funds

    Debt funds can be categorised based on their maturity period. The following are the debt funds types:

    • Money Market Funds

      Money market funds primarily invest in money market instruments with a maturity of up to 1 year. They are designed for investors who prefer low-risk debt securities with short-term maturities. They provide a relatively secure and stable investment option.

    • Liquid Funds

      Liquid funds invest in Debt and money market instruments with maturity of upto 91 days only. They present a favourable option for short-term investments, as they generally offer higher debt funds returns compared to savings accounts.

    • Dynamic Bond Funds

      Dynamic bond funds invest in debt instruments with different maturities, depending on the prevailing interest rate regime. They are well-suited for investors who have a moderate risk-bearing capacity and an investment timeframe of 3 to 5 years.

    • Gilt Funds

      Gilt funds invest at least 80% of their assets in Government bonds of varying maturities. These funds do not carry credit risk but they are susceptible to high interest rate risk. These funds perform well in a falling interest rate environment.

    • Banking and PSU Funds

      Banking and PSU funds invest a minimum of 80% of their portfolio in debt instruments issued by banks, PSUs, and public financial institutions. With moderate level risk, they provide an optimum balance between liquidity, yield and safety.

    • Corporate Bond Fund

      Corporate bond funds invest a minimum of 80% of their total assets in AA+ or higher-rated corporate bonds. These funds are ideal for risk-averse investors seeking regular income and safety.

    • Floater Funds

      Floater funds invest at least 65% of their portfolio funds in floating rate instruments such as certificates of deposit. They come with low interest rate risk and debt fund interest rates keep changing periodically.

    • Credit Risk Funds

      Credit risk funds allocate at least 65% of their investible corpus in corporate bonds rated AA or below. Owing to this, these funds tend to generate slightly higher yields than the highest-quality bonds coupled with certain credit risk.

    • Overnight Funds

      Overnight funds invest in 1-day maturity securities, mostly money market instruments. These funds tend to provide safety and liquidity rather than high returns. They carry negligible credit risk and interest rate risk.

    • Ultra Short Duration Funds

      These funds invest in a combination of money market instruments and debt securities in such a way that the Macaulay duration of the scheme falls within the range of three to six months.

    • Low Duration Funds

      These funds invest in a combination of money market instruments and debt securities in such a way that the Macaulay duration of the scheme falls within the range of six to twelve months.


    • Short Duration Funds

      These funds invest in a combination of money market instruments and debt securities in such a way that the Macaulay duration of the scheme falls within the range of one to three years.


    • Medium Duration Funds

      These funds invest in a combination of money market instruments and debt securities in such a way that the Macaulay duration of the scheme falls within the range of three to four years.


    • Medium to Long Duration Funds

      These funds invest in a combination of money market instruments and debt securities in such a way that the Macaulay duration of the scheme falls within the range of four to seven years.


    • Long Duration Funds

      These funds invest in money market instruments and debt securities strategically, targeting a Macaulay duration of over seven years.

    Risks in Debt Funds

    Debt mutual funds typically carry the following risks:


    • Interest Rate Risk

      - It refers to the impact of fluctuating interest rates on the value of the securities held within the scheme.


    • Credit Risk

      – It pertains to the likelihood of the issuer defaulting on the repayment of both the principal amount and the interest.


    • Liquidity Risk

      – It refers to the risk faced by the fund house when it lacks sufficient liquidity to fulfill redemption requests from investors.

    How to Invest in Debt Funds Online?

    You can invest in debt funds by following these simple steps:

    • Login through App or website

      Download and install the app on your mobile device or visit the website to create a login/signup account.


    • Select the desired debt fund

      Choose the debt funds you want to invest in by browsing or searching for them.


    • Select investment mode

      Choose your preferred investment mode. You can invest in debt funds via lump sum or Systematic Investment Plan (SIP).


    • Make payment and begin investing

      Make the payment securely using Net Banking or UPI and begin investing in the debt funds instantly.

    Taxation for Debt Funds

    The rate of tax on debt mutual funds is as follows:


    On Redemption

    Pursuant to amendment to the Finance Bill 2023, any capital gains earned on investments made in debt funds on or after 1 April 2023, will be considered as short-term capital gains and added to the investor’s income and taxed at the applicable income tax slab rates (plus any applicable surcharge and cess), regardless of the investment holding period.

    Please note that investments made on or before March 31, 2023, and held for more than 36 months will be eligible for indexation benefit in taxation. Gains on such investments will be taxed at a rate of 20% (plus applicable surcharge and cess) after taking into account the indexation benefit.


    On IDCW

    Any income received under this option would be considered as income for the investors and hence would be taxed at applicable tax slab rates. Aditya Birla Sun Life AMC Limited /Aditya Birla Sun Life Mutual Fund is not guaranteeing/ offering/ communicating any indicative yield/returns on investments.

    Factors to consider before investing in Debt Funds

    Here are some important aspects that you must consider before investing in debt funds in India:


    Risks in Debt Funds

    Debts funds fundamentally carry three types of risks:

    1. Credit Risk - which is the default risk of the issuer not repaying the principal and interest.

    2. Interest Rate Risk - which is the effect of changing interest rates on the value of the scheme's securities.

    3. Liquidity Risk - which is the risk carried by the fund house of not having adequate liquidity to meet redemption requests.


    Returns

    Debt funds offer lower returns as compared to equity funds. Also, there is no guarantee of the returns. The NAV of debt funds fluctuates with changes in the interest rate. If the interest rates rise, then the NAV of a debt fund falls and vice-versa

    Expense Ratio

    This is an important aspect while investing in debt funds. The expense ratio is a percentage of the fund's total assets which a fee towards fund management services. Since the returns in debt funds are not very high, a high expense ratio can dent your earnings. Look for schemes with a lower expense ratio and stay invested for a longer-term.

    Which debt fund can be considered the best?

    Selecting the best debt fund will depend on your investment horizon. If you want to invest for 1 day to up to a month then opt for Overnight Funds or Liquid Funds. For up to 6 months, ultra-short Duration funds. For 6 months to 1 year time period. Money Market funds. and if the investment horizon is between 1 year and 3 years, you can go for corporate bond funds, Banking & PSU Bonds Funds, or Short Duration Bond Funds.

    Frequently Asked Questions

    While no debt fund can be a 100% safe, there are certain type of debt mutual funds that have lower risks than others. Liquid fund is a type of debt fund that invest in low-risk money market instruments of very short tenures, tend to have both lower credit risk and interest rate risk.

    Yes, debt fund investing comes with several benefits. These include:

    • - Debt funds can provide regular income to investors

    • - Debt mutual fund can provide diversification and reasonable stability to an investor’s portfolio as they are less volatile than equity.

    • - These funds can provide high liquidity to investors as compared to other fixed income instruments

      Also Read - How to Invest in Mutual Funds?

    Although rare, debt funds can give negative returns. Debt funds are subject to interest rate risk – i.e.: when interest rates rise prices fall. This can result in negative returns for investors if fund managers are forced to liquidate to meet redemption requirements or if investors redeem shortly after such downside.
    However, when investments are held till maturity, they eliminate duration risk. Thus, eventually these downfalls in the portfolio constituents can be recovered.

    No, investment in debt funds is not necessarily risk free. The level and kind of risk a debt fund is subject to depends primarily on two aspects. The nature of debt instruments in its portfolio as well as the duration of the fund.
    High quality funds that invest in sovereign instruments like G-secs or low risk instruments such as commercial paper, treasury bills etc. tend to have minimal credit risk. On the other hand, short duration funds tend to have lower interest/duration risk.

    Debt funds are subject to certain risks. These primarily include:

    • - Credit/default risk
      This is the risk that the borrowers of debt instruments invested in by the fund default in making interest payments or default in repaying the principal.

    • - Interest rate/Duration risk
      This risk arises due to the inverse relation between market interest rates and debt instrument prices. This means that when interest rates rise, their prices fall and vice versa. The longer the duration of the fund, the higher this risk tends to be.

      Also Read - Type of mutual fund

    No, debt funds are open ended and thus have no lock-in period. Being highly liquid, investment in these funds can be redeemed by investors at any time.

    While debt fund investment is good for short and medium term, they can also be good for conservative long-term investors. Investors who wish to finance their long-term goals but have relatively low risk appetite can opt for long duration debt funds for less volatile returns over the long term.

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