+91-22-48913909Long Term Debt Funds - When Should You Invest?
Long term debt funds are a type of Debt Mutual Funds that invest in corporate Bonds and government securities (g-secs) that have a long-term maturity period. The average maturity of these funds is in excess of 3 years, most of the times. That is why, these funds are suitable for investors who wish to make a mid to long term Investment plan i.e., typically for 3-5 years or even more. Let's understand how long term debt funds works and what are the best long term bonds funds to invest in 2025.
Long Term Debt Funds - A Plan for Long Term Investment
Long term debt funds invest their major Underlying asset in debt instruments like corporate debentures, bonds and money market instruments & government securities with a higher maturity period. Investors should invest in long term debt funds if they have an investment time frame of more than 3 years. These funds generally come with lower risk compared to equity mutual funds but carry a certain level of credit and interest rate risk. This fund is suitable for investors who are willing to take on some level of risk in their investment.
Long-term debt funds are sensitive to changes in the interest rate and are more volatile than other categories of debt funds. The performance of these funds largely depends on the Economy's interest rate cycle, with falling interest rates benefiting these funds the most. Interest rates and prices of the debt instruments have an inverse relationship, which means that they move in opposite directions. For instance, a falling interest rate is good for debt funds or bond funds. Long term Income funds usually benefit when the interest rates are moving downwards. Moreover, during interest rate falls, the bond prices go up and this boost NAVs of the Debt fund schemes.
In a falling interest rate scenario, the average maturities of such bonds can go up to around 7-10 years. When the interest rates rise, they stock up lower tenured securities and keep the Portfolio’s average maturity low.
It's important to consider economic factors, including Inflation trends and monetary policy, when determining the right time to invest in long-term debt funds. Monitoring central Bank announcements, such as interest rate cuts or hikes, can provide insights into potential Market shifts.
Mostly, it is advisable to invest in long term bond funds when the interest rates are expected to ease down because a decrease in the interest rates causes a rise in the prices of long-term securities. Investors who are comfortable with fluctuating interest rates in the market, should only prefer Investing in long term debt funds.
It’s also crucial to have a diversified portfolio. Relying heavily on long-term debt funds can expose your investment to volatility if interest rates rise unexpectedly. A balanced mix of equities, short-term debt, and long-term debt ensures you are better protected in various market conditions.
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Returns and Risk
These funds are meant to give returns in excess of bank fixed deposits. One of the significant benefits of long-term debt funds is their potential to provide inflation-adjusted returns, making them an attractive choice for investors looking to preserve purchasing power over time. Furthermore, if held for more than three years, the returns are more tax efficient. But, on the risk side, these funds can get volatile when the interest rates suddenly change direction. In a sustained rising interest rate regime, these funds give modest returns as they cannot sell long-dated bonds and switch to shorter tenured scripts.
Additionally, investors need to be aware of the credit risk associated with these funds. While many long-term debt funds invest in highly rated securities, there can still be a risk of Default if a corporate bond issuer faces financial trouble. Hence, investors should assess the credit profile of the fund before investing.
Impact of Inflation on Long Term Debt Funds
Inflation has a direct impact on the real returns of long-term debt funds. When inflation rises, the purchasing power of future cash flows from bonds decreases. This means that, even if your fund delivers nominal returns, the real returns (adjusted for inflation) could be lower. Investors should closely monitor inflation trends because a higher-than-expected inflation rate could erode the value of their long-term investments.
However, during periods of moderate inflation, long-term debt funds can still provide decent real returns, especially when paired with tax benefits from indexation.
Long Term Debt Funds Taxation
Tax implication on debt funds is computed in the following manner-
Short Term Capital Gains
If the holding period of a debt investment is less than 36 months, then it is classified as a short-term investment and these are taxed as per individual's tax slab.
Long Term Capital Gains
If the holding period of debt investment is more than 36 months, then it is classified as a long-term investment and is taxed at 20% with an indexation benefit.
| Capital Gains | Investment Holding Gains | Taxation |
|---|---|---|
| Short Term Capital Gains | Less than 36 months | As per individual's tax slab |
| Long Term Capital Gains | More than 36 months | 20% with indexation benefits |
The indexation benefit is a key advantage of holding debt funds for the long term. It allows investors to adjust the cost of their investment for inflation, thereby reducing the tax burden.
Ideal Investor Profile for Long Term Debt Funds
Long-term debt funds are suitable for:
- Investors with a moderate risk appetite: These funds are not risk-free but are less volatile compared to Equity Funds.
- Investors looking for stable returns over 3-5 years: Those who prefer a predictable return pattern and can Handle interest rate fluctuations.
- Tax-conscious investors: Due to the tax benefits of indexation, these funds are more attractive than traditional fixed deposits for long-term holdings.
- Investors seeking an alternative to equity: Those who prefer debt over equities but want better returns than short-term debt funds.
How Interest Rate Cycles Affect Long Term Debt Funds
Interest rate cycles play a critical role in determining the performance of long-term debt funds. In a falling interest rate scenario, long-term debt funds typically perform well, as bond prices increase. Conversely, when interest rates are rising, long-term debt funds may Underperform because bond prices tend to decrease.
It is crucial for investors to understand where the economy is in the interest rate cycle before committing to long-term debt funds. For instance, during an expansion phase in the economy where central banks may hike interest rates to curb inflation, long-term debt funds could see volatility.
How to Invest in Long Term Bond Funds?
Investors can invest in two ways— SIP or Lump sum. For average investors, SIP (Systematic Investment Plan) is the most viable option. It gives you a systematic option of investing monthly/quarterly/annually Basis. In a lump sum, investors have to invest a considerable amount as a one-time down payment in the scheme. The minimum investment amount for a lump sum is INR 5000, whereas for a SIP it is INR 500.
SIP is an excellent way to mitigate market timing risks. By investing periodically, you benefit from rupee cost averaging, which can be especially helpful in a volatile interest rate environment. Lump sum investments are ideal for those with a large amount to invest upfront and who are confident in the market outlook for long-term interest rates.
Best Long Term Bond Funds to Invest in 2025
Fund NAV Net Assets (Cr) Min Investment Min SIP Investment 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 2024 (%) Debt Yield (YTM) Mod. Duration Eff. Maturity Franklin India Corporate Debt Fund Growth ₹102.536
↑ 0.03 ₹1,309 10,000 500 1.5 2.9 8.9 7.7 7.6 7.01% 2Y 6M 29D 6Y 4M 28D BNP Paribas Corporate Bond Fund Growth ₹28.2744
↓ -0.01 ₹492 5,000 300 1.4 2.5 8.2 7.8 8.3 6.76% 3Y 8M 8D 5Y 7D ICICI Prudential Corporate Bond Fund Growth ₹30.7411
↑ 0.01 ₹34,549 5,000 100 1.6 2.9 8 7.8 8 6.89% 2Y 10M 13D 5Y 4M 20D Kotak Corporate Bond Fund Standard Growth ₹3,878.52
↑ 0.68 ₹18,855 5,000 1,000 1.4 2.5 7.8 7.6 8.3 6.91% 3Y 1M 28D 4Y 10M 28D Nippon India Prime Debt Fund Growth ₹61.5931
↓ 0.00 ₹10,633 1,000 100 1.3 2.3 7.8 7.8 8.4 6.95% 3Y 8M 23D 5Y 1M 10D Sundaram Corporate Bond Fund Growth ₹41.2108
↑ 0.00 ₹773 5,000 250 1.3 2.4 7.6 7.3 8 6.72% 3Y 4M 2D 4Y 6M 22D Invesco India Corporate Bond Fund Growth ₹3,260.13
↓ -0.62 ₹7,364 5,000 100 1.3 2.2 7.6 7.4 8.1 6.75% 3Y 4M 28D 4Y 4M 24D Bandhan Corporate Bond Fund Growth ₹19.696
↓ 0.00 ₹15,865 5,000 1,000 1.2 2.2 7.4 7.3 7.7 6.53% 2Y 3M 2Y 8M 23D Aditya Birla Sun Life Corporate Bond Fund Growth ₹115.637
↑ 0.01 ₹30,119 1,000 100 1.4 2.2 7.2 7.7 8.5 6.98% 4Y 9M 14D 7Y 4M 2D HDFC Corporate Bond Fund Growth ₹33.3423
↑ 0.01 ₹36,382 5,000 300 1.4 2.2 7.2 7.6 8.6 6.97% 4Y 4M 13D 7Y 6M 25D Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 19 Dec 25 Research Highlights & Commentary of 10 Funds showcased
Commentary Franklin India Corporate Debt Fund BNP Paribas Corporate Bond Fund ICICI Prudential Corporate Bond Fund Kotak Corporate Bond Fund Standard Nippon India Prime Debt Fund Sundaram Corporate Bond Fund Invesco India Corporate Bond Fund Bandhan Corporate Bond Fund Aditya Birla Sun Life Corporate Bond Fund HDFC Corporate Bond Fund Point 1 Bottom quartile AUM (₹1,309 Cr). Bottom quartile AUM (₹492 Cr). Top quartile AUM (₹34,549 Cr). Upper mid AUM (₹18,855 Cr). Lower mid AUM (₹10,633 Cr). Bottom quartile AUM (₹773 Cr). Lower mid AUM (₹7,364 Cr). Upper mid AUM (₹15,865 Cr). Upper mid AUM (₹30,119 Cr). Highest AUM (₹36,382 Cr). Point 2 Oldest track record among peers (28 yrs). Established history (17+ yrs). Established history (16+ yrs). Established history (18+ yrs). Established history (25+ yrs). Established history (20+ yrs). Established history (18+ yrs). Established history (9+ yrs). Established history (28+ yrs). Established history (15+ yrs). Point 3 Rating: 2★ (bottom quartile). Rating: 3★ (lower mid). Rating: 4★ (upper mid). Rating: 4★ (upper mid). Rating: 4★ (upper mid). Rating: 3★ (lower mid). Rating: 2★ (bottom quartile). Not Rated. Top rated. Rating: 5★ (top quartile). Point 4 Risk profile: Moderate. Risk profile: Moderate. Risk profile: Moderately Low. Risk profile: Moderately Low. Risk profile: Moderately Low. Risk profile: Moderately Low. Risk profile: Moderate. Risk profile: Moderate. Risk profile: Moderately Low. Risk profile: Moderately Low. Point 5 1Y return: 8.91% (top quartile). 1Y return: 8.24% (top quartile). 1Y return: 7.97% (upper mid). 1Y return: 7.83% (upper mid). 1Y return: 7.76% (upper mid). 1Y return: 7.59% (lower mid). 1Y return: 7.57% (lower mid). 1Y return: 7.36% (bottom quartile). 1Y return: 7.25% (bottom quartile). 1Y return: 7.24% (bottom quartile). Point 6 1M return: 0.26% (top quartile). 1M return: -0.04% (bottom quartile). 1M return: 0.22% (top quartile). 1M return: 0.07% (upper mid). 1M return: -0.01% (lower mid). 1M return: 0.01% (upper mid). 1M return: -0.01% (bottom quartile). 1M return: 0.06% (upper mid). 1M return: -0.05% (bottom quartile). 1M return: -0.01% (lower mid). Point 7 Sharpe: 1.32 (upper mid). Sharpe: 1.45 (top quartile). Sharpe: 1.64 (top quartile). Sharpe: 1.27 (upper mid). Sharpe: 1.11 (upper mid). Sharpe: 1.09 (lower mid). Sharpe: 1.06 (lower mid). Sharpe: 1.06 (bottom quartile). Sharpe: 0.87 (bottom quartile). Sharpe: 0.84 (bottom quartile). Point 8 Information ratio: 0.00 (top quartile). Information ratio: 0.00 (top quartile). Information ratio: 0.00 (upper mid). Information ratio: 0.00 (upper mid). Information ratio: 0.00 (upper mid). Information ratio: 0.00 (lower mid). Information ratio: 0.00 (lower mid). Information ratio: 0.00 (bottom quartile). Information ratio: 0.00 (bottom quartile). Information ratio: 0.00 (bottom quartile). Point 9 Yield to maturity (debt): 7.01% (top quartile). Yield to maturity (debt): 6.76% (lower mid). Yield to maturity (debt): 6.89% (lower mid). Yield to maturity (debt): 6.91% (upper mid). Yield to maturity (debt): 6.95% (upper mid). Yield to maturity (debt): 6.72% (bottom quartile). Yield to maturity (debt): 6.75% (bottom quartile). Yield to maturity (debt): 6.53% (bottom quartile). Yield to maturity (debt): 6.98% (top quartile). Yield to maturity (debt): 6.97% (upper mid). Point 10 Modified duration: 2.58 yrs (top quartile). Modified duration: 3.69 yrs (lower mid). Modified duration: 2.87 yrs (upper mid). Modified duration: 3.16 yrs (upper mid). Modified duration: 3.73 yrs (bottom quartile). Modified duration: 3.34 yrs (upper mid). Modified duration: 3.41 yrs (lower mid). Modified duration: 2.25 yrs (top quartile). Modified duration: 4.79 yrs (bottom quartile). Modified duration: 4.37 yrs (bottom quartile). Franklin India Corporate Debt Fund
BNP Paribas Corporate Bond Fund
ICICI Prudential Corporate Bond Fund
Kotak Corporate Bond Fund Standard
Nippon India Prime Debt Fund
Sundaram Corporate Bond Fund
Invesco India Corporate Bond Fund
Bandhan Corporate Bond Fund
Aditya Birla Sun Life Corporate Bond Fund
HDFC Corporate Bond Fund
(Erstwhile Franklin India Income Builder Account - Plan A) The investment objective of the Scheme is primarily to provide investors Regular income under the Dividend Plan and Capital appreciation under the Growth Plan. Below is the key information for Franklin India Corporate Debt Fund Returns up to 1 year are on The investment objective of the Scheme is to generate income and capital gains through investments in a portfolio of debt and money market instruments. However, there can be no assurance that the investment objectives of the Scheme will be realized. The Scheme launched hereunder does not guarantee/indicate any returns. Research Highlights for BNP Paribas Corporate Bond Fund Below is the key information for BNP Paribas Corporate Bond Fund Returns up to 1 year are on (Erstwhile ICICI Prudential Ultra Short Term Plan) ICICI Prudential Ultra Short Term Plan is an open-ended income fund that intends to generate regular income through investments in a basket of debt and money market instruments of very short maturities with a view to providing reasonable returns, while maintaining an optimum balance of safety, liquidity and yield. However, there can be no assurance that the investment objective of the scheme will be realized. Research Highlights for ICICI Prudential Corporate Bond Fund Below is the key information for ICICI Prudential Corporate Bond Fund Returns up to 1 year are on The primary objective of the Scheme is to generate income through investment primarily in low duration debt & money market securities. However, there is no
assurance that the objective of the scheme will be realized. Research Highlights for Kotak Corporate Bond Fund Standard Below is the key information for Kotak Corporate Bond Fund Standard Returns up to 1 year are on (Erstwhile Reliance Medium Term Fund) The primary investment objective of the Scheme is to generate regular income in order to make regular dividend payments to unit-holders and the secondary objective is growth of capital. Research Highlights for Nippon India Prime Debt Fund Below is the key information for Nippon India Prime Debt Fund Returns up to 1 year are on (Erstwhile Sundaram Flexible Fund-Flexible Income Plan) To generate reasonable returns by creating a portfolio
comprising substantially of fixed income instruments and
money market instruments by keeping the interest rate risk
of the fund low. Research Highlights for Sundaram Corporate Bond Fund Below is the key information for Sundaram Corporate Bond Fund Returns up to 1 year are on (Erstwhile Invesco India Active Income Fund) To generate optimal returns while maintaining liquidity through active management of the portfolio by investing in debt and money market instruments. As the portfolio of the scheme will be actively managed, the Scheme may have a high turnover in order to achieve the investment objective. Research Highlights for Invesco India Corporate Bond Fund Below is the key information for Invesco India Corporate Bond Fund Returns up to 1 year are on The Fund seeks to provide steady income and capital appreciation by investing primarily in corporate debt securities across maturities and ratings. There is no assurance or guarantee that the objectives of the scheme will be realised. Research Highlights for Bandhan Corporate Bond Fund Below is the key information for Bandhan Corporate Bond Fund Returns up to 1 year are on (Erstwhile Aditya Birla Sun Life Short Term Fund) An Open-ended income scheme with the objective to generate income and capital appreciation by investing 100% of the corpus in a diversified portfolio of debt and money market securities. Research Highlights for Aditya Birla Sun Life Corporate Bond Fund Below is the key information for Aditya Birla Sun Life Corporate Bond Fund Returns up to 1 year are on (Erstwhile HDFC Medium Term Opportunities Fund) To generate regular income through investments in Debt/
Money Market Instruments and Government Securities with
maturities not exceeding 60 months. Research Highlights for HDFC Corporate Bond Fund Below is the key information for HDFC Corporate Bond Fund Returns up to 1 year are on 1. Franklin India Corporate Debt Fund
Franklin India Corporate Debt Fund
Growth Launch Date 23 Jun 97 NAV (19 Dec 25) ₹102.536 ↑ 0.03 (0.03 %) Net Assets (Cr) ₹1,309 on 30 Nov 25 Category Debt - Corporate Bond AMC Franklin Templeton Asst Mgmt(IND)Pvt Ltd Rating ☆☆ Risk Moderate Expense Ratio 0.79 Sharpe Ratio 1.32 Information Ratio 0 Alpha Ratio 0 Min Investment 10,000 Min SIP Investment 500 Exit Load 0-1 Years (0.5%),1 Years and above(NIL) Yield to Maturity 7.01% Effective Maturity 6 Years 4 Months 28 Days Modified Duration 2 Years 6 Months 29 Days Growth of 10,000 investment over the years.
Date Value 30 Nov 20 ₹10,000 30 Nov 21 ₹10,397 30 Nov 22 ₹10,697 30 Nov 23 ₹11,379 30 Nov 24 ₹12,254 30 Nov 25 ₹13,383 Returns for Franklin India Corporate Debt Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 19 Dec 25 Duration Returns 1 Month 0.3% 3 Month 1.5% 6 Month 2.9% 1 Year 8.9% 3 Year 7.7% 5 Year 6% 10 Year 15 Year Since launch 8.5% Historical performance (Yearly) on absolute basis
Year Returns 2024 7.6% 2023 6.5% 2022 3.2% 2021 3.8% 2020 9% 2019 9.2% 2018 7.5% 2017 7.7% 2016 9% 2015 8.4% Fund Manager information for Franklin India Corporate Debt Fund
Name Since Tenure Rahul Goswami 6 Oct 23 2.07 Yr. Anuj Tagra 7 Mar 24 1.65 Yr. Chandni Gupta 7 Mar 24 1.65 Yr. Data below for Franklin India Corporate Debt Fund as on 30 Nov 25
Asset Allocation
Asset Class Value Cash 12.24% Debt 83% Other 4.75% Debt Sector Allocation
Sector Value Corporate 62.84% Government 20.16% Cash Equivalent 12.24% Credit Quality
Rating Value AA 9.81% AAA 90.19% Top Securities Holdings / Portfolio
Name Holding Value Quantity 6.9% Govt Stock 2065
Sovereign Bonds | -6% ₹81 Cr 8,529,500
↑ 7,750,000 Poonawalla Fincorp Limited
Debentures | -6% ₹81 Cr 8,000 National Bank For Agriculture And Rural Development
Debentures | -6% ₹77 Cr 7,500 Jubilant Bevco Limited
Debentures | -5% ₹70 Cr 6,576 Small Industries Development Bank Of India
Debentures | -4% ₹54 Cr 500 Rec Limited
Debentures | -4% ₹52 Cr 500 Summit Digitel Infrastructure Limited
Debentures | -4% ₹52 Cr 5,000 Sikka Ports & Terminals Limited
Debentures | -4% ₹52 Cr 500 Rec Limited
Debentures | -4% ₹51 Cr 9,000 Embassy Office Parks Reit
Debentures | -4% ₹51 Cr 5,000 2. BNP Paribas Corporate Bond Fund
BNP Paribas Corporate Bond Fund
Growth Launch Date 8 Nov 08 NAV (19 Dec 25) ₹28.2744 ↓ -0.01 (-0.03 %) Net Assets (Cr) ₹492 on 30 Nov 25 Category Debt - Corporate Bond AMC BNP Paribas Asset Mgmt India Pvt. Ltd Rating ☆☆☆ Risk Moderate Expense Ratio 0.58 Sharpe Ratio 1.45 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 300 Exit Load 0-12 Months (1%),12-24 Months (0.5%),24-36 Months (0.25%),36 Months and above(NIL) Yield to Maturity 6.76% Effective Maturity 5 Years 7 Days Modified Duration 3 Years 8 Months 8 Days Growth of 10,000 investment over the years.
Date Value 30 Nov 20 ₹10,000 30 Nov 21 ₹10,249 30 Nov 22 ₹10,371 30 Nov 23 ₹11,060 30 Nov 24 ₹12,004 30 Nov 25 ₹13,071 Returns for BNP Paribas Corporate Bond Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 19 Dec 25 Duration Returns 1 Month 0% 3 Month 1.4% 6 Month 2.5% 1 Year 8.2% 3 Year 7.8% 5 Year 5.4% 10 Year 15 Year Since launch 6.3% Historical performance (Yearly) on absolute basis
Year Returns 2024 8.3% 2023 7% 2022 1.6% 2021 2.2% 2020 9.9% 2019 0.9% 2018 5.2% 2017 6.7% 2016 10.8% 2015 7.2% Fund Manager information for BNP Paribas Corporate Bond Fund
Name Since Tenure Gurvinder Wasan 21 Oct 24 1.03 Yr. Vikram Pamnani 10 Jul 24 1.31 Yr. Data below for BNP Paribas Corporate Bond Fund as on 30 Nov 25
Asset Allocation
Asset Class Value Cash 4.16% Equity 2.49% Debt 93.13% Other 0.22% Debt Sector Allocation
Sector Value Corporate 62.09% Government 31.04% Cash Equivalent 4.16% Credit Quality
Rating Value AAA 100% Top Securities Holdings / Portfolio
Name Holding Value Quantity National Bank For Agriculture And Rural Development
Debentures | -7% ₹30 Cr 3,000 6.68% Govt Stock 2040
Sovereign Bonds | -5% ₹24 Cr 2,400,000
↓ -500,000 7.18% Govt Stock 2033
Sovereign Bonds | -5% ₹21 Cr 2,000,000
↑ 500,000 Rec Limited
Debentures | -4% ₹19 Cr 1,900 Indian Railway Finance Corporation Limited
Debentures | -3% ₹15 Cr 1,500 Export Import Bank Of India
Debentures | -3% ₹15 Cr 1,500
↑ 500 Bajaj Housing Finance Limited
Debentures | -3% ₹15 Cr 1,500 Ntpc Limited
Debentures | -3% ₹15 Cr 1,500 Small Industries Development Bank Of India
Debentures | -3% ₹12 Cr 1,200 National Housing Bank
Debentures | -3% ₹11 Cr 1,100 3. ICICI Prudential Corporate Bond Fund
ICICI Prudential Corporate Bond Fund
Growth Launch Date 11 Aug 09 NAV (19 Dec 25) ₹30.7411 ↑ 0.01 (0.02 %) Net Assets (Cr) ₹34,549 on 15 Dec 25 Category Debt - Corporate Bond AMC ICICI Prudential Asset Management Company Limited Rating ☆☆☆☆ Risk Moderately Low Expense Ratio 0.57 Sharpe Ratio 1.64 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 100 Exit Load NIL Yield to Maturity 6.89% Effective Maturity 5 Years 4 Months 20 Days Modified Duration 2 Years 10 Months 13 Days Growth of 10,000 investment over the years.
Date Value 30 Nov 20 ₹10,000 30 Nov 21 ₹10,455 30 Nov 22 ₹10,876 30 Nov 23 ₹11,671 30 Nov 24 ₹12,623 30 Nov 25 ₹13,664 Returns for ICICI Prudential Corporate Bond Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 19 Dec 25 Duration Returns 1 Month 0.2% 3 Month 1.6% 6 Month 2.9% 1 Year 8% 3 Year 7.8% 5 Year 6.4% 10 Year 15 Year Since launch 7.1% Historical performance (Yearly) on absolute basis
Year Returns 2024 8% 2023 7.6% 2022 4.5% 2021 4.1% 2020 10.4% 2019 9.9% 2018 6.4% 2017 6.3% 2016 9.8% 2015 8.8% Fund Manager information for ICICI Prudential Corporate Bond Fund
Name Since Tenure Manish Banthia 22 Jan 24 1.78 Yr. Ritesh Lunawat 22 Jan 24 1.78 Yr. Data below for ICICI Prudential Corporate Bond Fund as on 15 Dec 25
Asset Allocation
Asset Class Value Cash 8.28% Debt 91.72% Debt Sector Allocation
Sector Value Corporate 54.85% Government 31.46% Cash Equivalent 8.14% Securitized 5.55% Credit Quality
Rating Value AAA 100% Top Securities Holdings / Portfolio
Name Holding Value Quantity 6.82% Govt Stock 2033
Sovereign Bonds | -5% ₹1,601 Cr 155,072,060 LIC Housing Finance Ltd
Debentures | -4% ₹1,483 Cr 145,500 SIDDHIVINAYAK SECURITISATION TRUST
Unlisted bonds | -3% ₹1,026 Cr 1,000 SHIVSHAKTI SECURITISATION TRUST
Unlisted bonds | -3% ₹922 Cr 900 7.1% Govt Stock 2034
Sovereign Bonds | -2% ₹864 Cr 83,594,780 Pipeline Infrastructure Limited
Debentures | -2% ₹832 Cr 80,500 7.34% Govt Stock 2064
Sovereign Bonds | -2% ₹579 Cr 58,412,000 6.79% Govt Stock 2034
Sovereign Bonds | -2% ₹570 Cr 56,222,270
↓ -11,160,140 National Bank For Agriculture And Rural Development
Debentures | -2% ₹548 Cr 54,000 6.9% Govt Stock 2065
Sovereign Bonds | -2% ₹531 Cr 56,500,000 4. Kotak Corporate Bond Fund Standard
Kotak Corporate Bond Fund Standard
Growth Launch Date 21 Sep 07 NAV (19 Dec 25) ₹3,878.52 ↑ 0.68 (0.02 %) Net Assets (Cr) ₹18,855 on 15 Dec 25 Category Debt - Corporate Bond AMC Kotak Mahindra Asset Management Co Ltd Rating ☆☆☆☆ Risk Moderately Low Expense Ratio 0.67 Sharpe Ratio 1.27 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 1,000 Exit Load NIL Yield to Maturity 6.91% Effective Maturity 4 Years 10 Months 28 Days Modified Duration 3 Years 1 Month 28 Days Growth of 10,000 investment over the years.
Date Value 30 Nov 20 ₹10,000 30 Nov 21 ₹10,395 30 Nov 22 ₹10,753 30 Nov 23 ₹11,452 30 Nov 24 ₹12,427 30 Nov 25 ₹13,452 Returns for Kotak Corporate Bond Fund Standard
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 19 Dec 25 Duration Returns 1 Month 0.1% 3 Month 1.4% 6 Month 2.5% 1 Year 7.8% 3 Year 7.6% 5 Year 6% 10 Year 15 Year Since launch 7.7% Historical performance (Yearly) on absolute basis
Year Returns 2024 8.3% 2023 6.9% 2022 3.7% 2021 3.8% 2020 9.7% 2019 9.6% 2018 7.5% 2017 6.9% 2016 9.4% 2015 8.8% Fund Manager information for Kotak Corporate Bond Fund Standard
Name Since Tenure Deepak Agrawal 1 Feb 15 10.75 Yr. Manu Sharma 1 Nov 22 3 Yr. Data below for Kotak Corporate Bond Fund Standard as on 15 Dec 25
Asset Allocation
Asset Class Value Cash 3.41% Debt 96.34% Other 0.25% Debt Sector Allocation
Sector Value Corporate 61.84% Government 32.67% Cash Equivalent 3.41% Securitized 1.84% Credit Quality
Rating Value AAA 100% Top Securities Holdings / Portfolio
Name Holding Value Quantity 7.18% Govt Stock 2033
Sovereign Bonds | -8% ₹1,575 Cr 151,935,080 7.09% Govt Stock 2054
Sovereign Bonds | -4% ₹761 Cr 78,100,000 National Bank For Agriculture And Rural Development
Debentures | -3% ₹635 Cr 62,500 National Bank For Agriculture And Rural Development
Debentures | -3% ₹593 Cr 58,500 6.99% Govt Stock 2034
Sovereign Bonds | -3% ₹499 Cr 49,000,000 Bajaj Finance Limited
Debentures | -2% ₹445 Cr 43,500 Small Industries Development Bank Of India
Debentures | -2% ₹356 Cr 35,000 National Bank For Agriculture And Rural Development
Debentures | -2% ₹356 Cr 35,000 Power Finance Corporation Limited
Debentures | -2% ₹356 Cr 35,000 Power Finance Corporation Limited
Debentures | -2% ₹330 Cr 32,500 5. Nippon India Prime Debt Fund
Nippon India Prime Debt Fund
Growth Launch Date 14 Sep 00 NAV (19 Dec 25) ₹61.5931 ↓ 0.00 (0.00 %) Net Assets (Cr) ₹10,633 on 15 Dec 25 Category Debt - Corporate Bond AMC Nippon Life Asset Management Ltd. Rating ☆☆☆☆ Risk Moderately Low Expense Ratio 0.71 Sharpe Ratio 1.11 Information Ratio 0 Alpha Ratio 0 Min Investment 1,000 Min SIP Investment 100 Exit Load NIL Yield to Maturity 6.95% Effective Maturity 5 Years 1 Month 10 Days Modified Duration 3 Years 8 Months 23 Days Growth of 10,000 investment over the years.
Date Value 30 Nov 20 ₹10,000 30 Nov 21 ₹10,482 30 Nov 22 ₹10,913 30 Nov 23 ₹11,661 30 Nov 24 ₹12,681 30 Nov 25 ₹13,729 Returns for Nippon India Prime Debt Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 19 Dec 25 Duration Returns 1 Month 0% 3 Month 1.3% 6 Month 2.3% 1 Year 7.8% 3 Year 7.8% 5 Year 6.5% 10 Year 15 Year Since launch 7.5% Historical performance (Yearly) on absolute basis
Year Returns 2024 8.4% 2023 7.1% 2022 4.3% 2021 4.7% 2020 9.5% 2019 7.8% 2018 6.9% 2017 6.6% 2016 9.1% 2015 8.7% Fund Manager information for Nippon India Prime Debt Fund
Name Since Tenure Vivek Sharma 1 Feb 20 5.75 Yr. Kinjal Desai 25 May 18 7.44 Yr. Lokesh Maru 5 Sep 25 0.16 Yr. Divya Sharma 5 Sep 25 0.16 Yr. Data below for Nippon India Prime Debt Fund as on 15 Dec 25
Asset Allocation
Asset Class Value Cash 4.02% Debt 95.75% Other 0.23% Debt Sector Allocation
Sector Value Corporate 51.05% Government 41.07% Cash Equivalent 4.02% Securitized 3.63% Credit Quality
Rating Value AAA 100% Top Securities Holdings / Portfolio
Name Holding Value Quantity 6.68% Govt Stock 2040
Sovereign Bonds | -7% ₹760 Cr 77,500,000
↑ 15,000,000 6.79% Govt Stock 2034
Sovereign Bonds | -4% ₹395 Cr 39,000,000
↓ -1,000,000 7.02% Govt Stock 2031
Sovereign Bonds | -2% ₹258 Cr 25,000,000 6.92% Govt Stock 2039
Sovereign Bonds | -2% ₹251 Cr 25,000,000 National Bank For Agriculture And Rural Development
Debentures | -2% ₹249 Cr 24,500
↑ 2,500 National Bank For Agriculture And Rural Development
Debentures | -2% ₹211 Cr 20,500 Aditya Birla Housing Finance Limited
Debentures | -2% ₹203 Cr 20,000 SIDDHIVINAYAK SECURITISATION TRUST
Unlisted bonds | -2% ₹203 Cr 200 SHIVSHAKTI SECURITISATION TRUST
Unlisted bonds | -2% ₹203 Cr 200 7.27% State Government Securities
Sovereign Bonds | -2% ₹201 Cr 20,000,000 6. Sundaram Corporate Bond Fund
Sundaram Corporate Bond Fund
Growth Launch Date 30 Dec 04 NAV (19 Dec 25) ₹41.2108 ↑ 0.00 (0.00 %) Net Assets (Cr) ₹773 on 30 Nov 25 Category Debt - Corporate Bond AMC Sundaram Asset Management Company Ltd Rating ☆☆☆ Risk Moderately Low Expense Ratio 0.54 Sharpe Ratio 1.09 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 250 Exit Load NIL Yield to Maturity 6.72% Effective Maturity 4 Years 6 Months 22 Days Modified Duration 3 Years 4 Months 2 Days Growth of 10,000 investment over the years.
Date Value 30 Nov 20 ₹10,000 30 Nov 21 ₹10,363 30 Nov 22 ₹10,695 30 Nov 23 ₹11,339 30 Nov 24 ₹12,279 30 Nov 25 ₹13,263 Returns for Sundaram Corporate Bond Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 19 Dec 25 Duration Returns 1 Month 0% 3 Month 1.3% 6 Month 2.4% 1 Year 7.6% 3 Year 7.3% 5 Year 5.8% 10 Year 15 Year Since launch 7% Historical performance (Yearly) on absolute basis
Year Returns 2024 8% 2023 6.3% 2022 3.7% 2021 3.5% 2020 11% 2019 11.3% 2018 4.8% 2017 5.4% 2016 11.7% 2015 8.7% Fund Manager information for Sundaram Corporate Bond Fund
Name Since Tenure Dwijendra Srivastava 31 Jul 10 15.27 Yr. Sandeep Agarwal 1 Jun 12 13.43 Yr. Data below for Sundaram Corporate Bond Fund as on 30 Nov 25
Asset Allocation
Asset Class Value Cash 3.57% Debt 96.04% Other 0.38% Debt Sector Allocation
Sector Value Corporate 59.33% Government 36.71% Cash Equivalent 3.57% Credit Quality
Rating Value AAA 100% Top Securities Holdings / Portfolio
Name Holding Value Quantity 6.33% Govt Stock 2035
Sovereign Bonds | -8% ₹61 Cr 6,200,000 Small Industries Development Bank Of India
Debentures | -7% ₹52 Cr 5,000 National Bank For Agriculture And Rural Development
Debentures | -6% ₹46 Cr 4,500 Indian Railway Finance Corporation Limited
Debentures | -5% ₹41 Cr 4,000 LIC Housing Finance Ltd
Debentures | -4% ₹31 Cr 300 HDFC Bank Limited
Debentures | -3% ₹26 Cr 2,500 National Bank For Agriculture And Rural Development
Debentures | -3% ₹26 Cr 2,500 LIC Housing Finance Ltd
Debentures | -3% ₹25 Cr 2,500 Rec Limited
Debentures | -3% ₹25 Cr 2,500 Kotak Mahindra Prime Limited
Debentures | -3% ₹25 Cr 2,500 7. Invesco India Corporate Bond Fund
Invesco India Corporate Bond Fund
Growth Launch Date 2 Aug 07 NAV (19 Dec 25) ₹3,260.13 ↓ -0.62 (-0.02 %) Net Assets (Cr) ₹7,364 on 15 Dec 25 Category Debt - Corporate Bond AMC Invesco Asset Management (India) Private Ltd Rating ☆☆ Risk Moderate Expense Ratio 0.67 Sharpe Ratio 1.06 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 100 Exit Load NIL Yield to Maturity 6.75% Effective Maturity 4 Years 4 Months 24 Days Modified Duration 3 Years 4 Months 28 Days Growth of 10,000 investment over the years.
Date Value 30 Nov 20 ₹10,000 30 Nov 21 ₹10,347 30 Nov 22 ₹10,613 30 Nov 23 ₹11,283 30 Nov 24 ₹12,228 30 Nov 25 ₹13,219 Returns for Invesco India Corporate Bond Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 19 Dec 25 Duration Returns 1 Month 0% 3 Month 1.3% 6 Month 2.2% 1 Year 7.6% 3 Year 7.4% 5 Year 5.7% 10 Year 15 Year Since launch 6.6% Historical performance (Yearly) on absolute basis
Year Returns 2024 8.1% 2023 6.7% 2022 2.9% 2021 3.4% 2020 10.1% 2019 11.1% 2018 4% 2017 1.8% 2016 14.1% 2015 5.2% Fund Manager information for Invesco India Corporate Bond Fund
Name Since Tenure Krishna Cheemalapati 16 Dec 20 4.88 Yr. Vikas Garg 26 Sep 20 5.1 Yr. Data below for Invesco India Corporate Bond Fund as on 15 Dec 25
Asset Allocation
Asset Class Value Cash 5.92% Debt 93.82% Other 0.25% Debt Sector Allocation
Sector Value Corporate 53% Government 41.14% Cash Equivalent 5.61% Credit Quality
Rating Value AAA 100% Top Securities Holdings / Portfolio
Name Holding Value Quantity 6.33% Govt Stock 2035
Sovereign Bonds | -5% ₹408 Cr 41,325,100
↓ -500,000 7.18% Govt Stock 2033
Sovereign Bonds | -5% ₹397 Cr 38,286,700
↑ 3,500,000 7.1% Govt Stock 2034
Sovereign Bonds | -3% ₹265 Cr 25,612,600 Small Industries Development Bank Of India
Debentures | -3% ₹249 Cr 24,500,000 6.79% Govt Stock 2034
Sovereign Bonds | -3% ₹214 Cr 21,091,100 Pipeline Infrastructure Limited
Debentures | -2% ₹176 Cr 17,000,000
↓ -2,500,000 National Bank For Agriculture And Rural Development
Debentures | -2% ₹173 Cr 17,000,000 LIC Housing Finance Ltd
Debentures | -2% ₹154 Cr 15,000,000 Bharti Telecom Limited
Debentures | -2% ₹150 Cr 15,000,000 National Bank For Agriculture And Rural Development
Debentures | -2% ₹146 Cr 14,200,000 8. Bandhan Corporate Bond Fund
Bandhan Corporate Bond Fund
Growth Launch Date 12 Jan 16 NAV (19 Dec 25) ₹19.696 ↓ 0.00 (-0.01 %) Net Assets (Cr) ₹15,865 on 30 Nov 25 Category Debt - Corporate Bond AMC IDFC Asset Management Company Limited Rating Risk Moderate Expense Ratio 0.65 Sharpe Ratio 1.06 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 1,000 Exit Load NIL Yield to Maturity 6.53% Effective Maturity 2 Years 8 Months 23 Days Modified Duration 2 Years 3 Months Growth of 10,000 investment over the years.
Date Value 30 Nov 20 ₹10,000 30 Nov 21 ₹10,391 30 Nov 22 ₹10,619 30 Nov 23 ₹11,336 30 Nov 24 ₹12,208 30 Nov 25 ₹13,159 Returns for Bandhan Corporate Bond Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 19 Dec 25 Duration Returns 1 Month 0.1% 3 Month 1.2% 6 Month 2.2% 1 Year 7.4% 3 Year 7.3% 5 Year 5.6% 10 Year 15 Year Since launch 7.1% Historical performance (Yearly) on absolute basis
Year Returns 2024 7.7% 2023 6.8% 2022 2.6% 2021 3.7% 2020 11.6% 2019 8.5% 2018 6.3% 2017 6.2% 2016 2015 Fund Manager information for Bandhan Corporate Bond Fund
Name Since Tenure Suyash Choudhary 28 Jul 21 4.26 Yr. Gautam Kaul 1 Dec 21 3.92 Yr. Brijesh Shah 10 Jun 24 1.39 Yr. Data below for Bandhan Corporate Bond Fund as on 30 Nov 25
Asset Allocation
Asset Class Value Cash 8.68% Debt 91.04% Other 0.28% Debt Sector Allocation
Sector Value Corporate 56.27% Government 34.77% Cash Equivalent 8.68% Credit Quality
Rating Value AAA 100% Top Securities Holdings / Portfolio
Name Holding Value Quantity 6.54% Govt Stock 2032
Sovereign Bonds | -7% ₹1,072 Cr 106,700,000 7.26% Govt Stock 2033
Sovereign Bonds | -5% ₹796 Cr 76,500,000
↓ -15,000,000 Larsen And Toubro Limited
Debentures | -4% ₹614 Cr 60,000,000 Reliance Industries Limited
Debentures | -4% ₹607 Cr 57,500,000 Bajaj Finance Limited
Debentures | -3% ₹538 Cr 53,500,000 7.02% Govt Stock 2031
Sovereign Bonds | -3% ₹536 Cr 52,000,000
↑ 19,500,000 7.18% Govt Stock 2033
Sovereign Bonds | -3% ₹515 Cr 49,700,000
↓ -31,000,000 Indian Oil Corporation Limited
Debentures | -3% ₹436 Cr 42,500,000 Ultratech Cement Limited
Debentures | -3% ₹432 Cr 42,500,000 Nuclear Power Corporation Of India Limited
Debentures | -3% ₹409 Cr 40,000,000 9. Aditya Birla Sun Life Corporate Bond Fund
Aditya Birla Sun Life Corporate Bond Fund
Growth Launch Date 3 Mar 97 NAV (19 Dec 25) ₹115.637 ↑ 0.01 (0.00 %) Net Assets (Cr) ₹30,119 on 15 Dec 25 Category Debt - Corporate Bond AMC Birla Sun Life Asset Management Co Ltd Rating ☆☆☆☆☆ Risk Moderately Low Expense Ratio 0.52 Sharpe Ratio 0.87 Information Ratio 0 Alpha Ratio 0 Min Investment 1,000 Min SIP Investment 100 Exit Load NIL Yield to Maturity 6.98% Effective Maturity 7 Years 4 Months 2 Days Modified Duration 4 Years 9 Months 14 Days Growth of 10,000 investment over the years.
Date Value 30 Nov 20 ₹10,000 30 Nov 21 ₹10,433 30 Nov 22 ₹10,821 30 Nov 23 ₹11,571 30 Nov 24 ₹12,592 30 Nov 25 ₹13,576 Returns for Aditya Birla Sun Life Corporate Bond Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 19 Dec 25 Duration Returns 1 Month -0.1% 3 Month 1.4% 6 Month 2.2% 1 Year 7.2% 3 Year 7.7% 5 Year 6.2% 10 Year 15 Year Since launch 8.9% Historical performance (Yearly) on absolute basis
Year Returns 2024 8.5% 2023 7.3% 2022 4.1% 2021 4% 2020 11.9% 2019 9.6% 2018 7% 2017 6.5% 2016 10.2% 2015 8.9% Fund Manager information for Aditya Birla Sun Life Corporate Bond Fund
Name Since Tenure Kaustubh Gupta 12 Apr 21 4.56 Yr. Data below for Aditya Birla Sun Life Corporate Bond Fund as on 15 Dec 25
Asset Allocation
Asset Class Value Cash 4.28% Debt 95.46% Other 0.26% Debt Sector Allocation
Sector Value Corporate 54.85% Government 39.57% Cash Equivalent 4.28% Securitized 1.04% Credit Quality
Rating Value AAA 100% Top Securities Holdings / Portfolio
Name Holding Value Quantity 6.92% Govt Stock 2039
Sovereign Bonds | -9% ₹2,699 Cr 269,236,200
↓ -2,500,000 6.79% Govt Stock 2034
Sovereign Bonds | -8% ₹2,296 Cr 226,500,000 6.68% Govt Stock 2040
Sovereign Bonds | -4% ₹1,304 Cr 133,000,000
↑ 19,500,000 National Bank For Agriculture And Rural Development
Debentures | -4% ₹1,154 Cr 113,500
↑ 5,000 7.34% Govt Stock 2064
Sovereign Bonds | -2% ₹719 Cr 72,500,000
↑ 10,500,000 7.1% Govt Stock 2034
Sovereign Bonds | -2% ₹715 Cr 69,161,700
↓ -1,500,000 Jamnagar Utilities & Power Private Limited
Debentures | -2% ₹594 Cr 59,000 Rec Limited
Debentures | -2% ₹586 Cr 60,000 Bajaj Housing Finance Limited
Debentures | -2% ₹566 Cr 55,000 Bharti Telecom Limited
Debentures | -2% ₹510 Cr 50,900
↑ 10,000 10. HDFC Corporate Bond Fund
HDFC Corporate Bond Fund
Growth Launch Date 29 Jun 10 NAV (19 Dec 25) ₹33.3423 ↑ 0.01 (0.04 %) Net Assets (Cr) ₹36,382 on 30 Nov 25 Category Debt - Corporate Bond AMC HDFC Asset Management Company Limited Rating ☆☆☆☆☆ Risk Moderately Low Expense Ratio 0.6 Sharpe Ratio 0.84 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 300 Exit Load NIL Yield to Maturity 6.97% Effective Maturity 7 Years 6 Months 25 Days Modified Duration 4 Years 4 Months 13 Days Growth of 10,000 investment over the years.
Date Value 30 Nov 20 ₹10,000 30 Nov 21 ₹10,436 30 Nov 22 ₹10,745 30 Nov 23 ₹11,491 30 Nov 24 ₹12,491 30 Nov 25 ₹13,465 Returns for HDFC Corporate Bond Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 19 Dec 25 Duration Returns 1 Month 0% 3 Month 1.4% 6 Month 2.2% 1 Year 7.2% 3 Year 7.6% 5 Year 6% 10 Year 15 Year Since launch 8.1% Historical performance (Yearly) on absolute basis
Year Returns 2024 8.6% 2023 7.2% 2022 3.3% 2021 3.9% 2020 11.8% 2019 10.3% 2018 6.5% 2017 6.5% 2016 10.6% 2015 8.6% Fund Manager information for HDFC Corporate Bond Fund
Name Since Tenure Anupam Joshi 27 Oct 15 10.02 Yr. Dhruv Muchhal 22 Jun 23 2.36 Yr. Data below for HDFC Corporate Bond Fund as on 30 Nov 25
Asset Allocation
Asset Class Value Cash 3.31% Debt 96.41% Other 0.28% Debt Sector Allocation
Sector Value Corporate 55.23% Government 39.18% Cash Equivalent 3.33% Securitized 1.98% Credit Quality
Rating Value AAA 100% Top Securities Holdings / Portfolio
Name Holding Value Quantity 6.68% Govt Stock 2040
Sovereign Bonds | -6% ₹2,254 Cr 230,000,000 Bajaj Finance Limited
Debentures | -3% ₹1,132 Cr 112,500 6.9% Govt Stock 2065
Sovereign Bonds | -3% ₹1,034 Cr 110,000,000
↑ 50,000,000 6.82% Govt Stock 2033
Sovereign Bonds | -3% ₹919 Cr 89,000,000 State Bank Of India
Debentures | -2% ₹806 Cr 800 6.92% Govt Stock 2039
Sovereign Bonds | -2% ₹752 Cr 75,000,000
↓ -28,500,000 HDFC Bank Limited
Debentures | -1% ₹517 Cr 50,000 Small Industries Development Bank Of India
Debentures | -1% ₹509 Cr 50,000 LIC Housing Finance Ltd
Debentures | -1% ₹509 Cr 5,000 Rural Electrification Corporation Limited
Debentures | -1% ₹472 Cr 4,500
Comparing Long Term Debt Funds with Other Fixed-Income Instruments
It’s helpful to compare long-term debt funds with other investment options like bank fixed deposits (FDs), public provident funds (PPF), and bonds. While long-term debt funds offer better liquidity and tax Efficiency (especially after 3 years), they come with market risks, which instruments like FDs do not. PPF, on the other hand, has a Fixed Interest Rate and offers government backing but lacks liquidity, as it comes with a long lock-in period.
Corporate bonds may offer higher yields but come with credit risks, especially for lower-rated companies. Long-term debt funds, in contrast, give exposure to a diversified pool of bonds, spreading out risk.
Role of Credit Rating in Long Term Debt Funds
Before investing in long-term debt funds, it is crucial to check the credit quality of the bonds within the fund's portfolio. Debt instruments are assigned credit ratings, which indicate the issuer’s ability to meet their financial obligations. Funds with a portfolio of AAA-rated bonds are considered safer but might offer slightly lower returns compared to funds with lower-rated bonds.
However, investors should avoid funds with heavy exposure to low-rated bonds, unless they have a higher risk tolerance, as defaults can erode returns significantly.
Debt Fund Credit Risks vs. Sovereign Bonds
Sovereign bonds, especially government securities (G-Secs), are seen as one of the safest forms of investment as they are backed by the government. However, corporate bonds, a common component of long-term debt funds, carry credit risks. These risks arise when a corporation is unable to repay its debt obligations, which can affect the returns of the fund. Therefore, investors must assess the credit ratings of the bonds held by the debt fund and weigh their risk accordingly.
Duration vs. Yield: Key Concepts to Understand
Duration is a measure of a bond fund's sensitivity to interest rate changes. Long-term debt funds tend to have higher durations because their underlying bonds have longer maturity periods. A higher duration means that the fund's NAV will be more sensitive to changes in interest rates.
Yield is another important metric, representing the income generated by the fund's underlying bonds as a percentage of the NAV. In long-term debt funds, yield tends to be lower in high-quality bonds but rises with riskier bonds.
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Research Highlights for Franklin India Corporate Debt Fund