Fixed-income mutual funds or debt funds are mutual fund schemes that invest in fixed-income securities, like all tenures of government securities, debentures, corporate bonds, and other money market instruments. There are several categories of fixed-income mutual funds or debt funds such as liquid funds, long-term income funds, fixed maturity plans (FMP), Corporate Bond Funds, Dynamic Bond Funds and Gilt Funds.
These mutual funds buy bonds issued by the Central government, state government, and private companies and earn interest income on the investments. They benefit from lower volatility compared to equity mutual funds. Let us take a look at the top 5 gilt mutual funds a category of debt mutual funds that invest only in state and Central government securities and thus come with zero credit risk due to the sovereign guarantee attached to it. The underlying securities mature between three and 20 years and benefit the most in a falling interest rate regime.
ICICI Prudential Gilt Fund
The ICICI Prudential Gilt Fund emerges at the top spot if we take 5-year returns of gilt mutual funds as investors enjoyed a return of 8.10 per cent. Debt mutual funds are meant to be held in your portfolio for a long time so the entire list is based primarily on 5-year returns. However, performers over 5 years have demonstrated consistent returns across different tenures. Over one year, it delivered a return of 8.13 per cent, and it posted a three-year return of 6.60 per cent (the highest in the category). Investors who held this fund for a decade got a return of 8.98 per cent.
The minimum SIP investment in the fund is Rs 1,000. The fund seeks to invest in gilt including T-Bills with medium to long maturity, with average maturity of the portfolio normally not exceeding 8 years.
SBI Magnum Gilt Fund
SBI Magnum Gilt Fund grabs the second spot, normally maintaining an average maturity of more than three years. SBI's gilt fund gave a solid 7.99 per cent in five years and also came in top 5 positions in three, five and 10-year returns. It provided a one-year return of 7.49 per cent, a three-year return of 6.49 per cent and a ten-year return of 9.25 per cent.
DSP Gilt Fund
The DSP Gilt Fund has clocked top 5 performances across one, three and 5 years. It clocked an 8.28 per cent return over one year. The three-year return stands at 6.23 per cent and five-year returns at 7.97 per cent. Long-term investors were rewarded with 8.68 per cent over the past ten years.
Edelweiss Government Securities Fund
The Edelweiss Government Securities Fund clocked a five-year return of 7.87 per cent and boasts of being in the top 5 spots in terms of returns across three tenures. Apart from 5 years these tenures - one year with 8.16 per cent and ten years- with 8.97 per cent.
Bandhan GSF Investment Fund
Bandhan GSF Investment Fund boasts an impressive 8.66 per cent over the past year which is the second-highest return in the category. The fund posted 5.89 per cent in three years, 7.82 per cent in five years and 8.88 per cent in 10 years. The fund has invested around 96 per cent of its portfolio in GOI Sec 7.30% according to Value Research data.
