Debt funds that invest in government securities are known as gilt funds. Golden-edged certificates were once used to issue government bonds. The term gilt refers to certificates with gilded edges. According to Sebi regulations, gilt funds must invest at least 80% of their assets in government securities.
Investors don't pay as much attention to gilt mutual funds or schemes that invest in government securities as they do to some of the other debt categories. According to statistics, numerous gilt funds have achieved solid double-digit returns over the last three years. There is no credit risk because these are issued by Sovereign, but there may be some interest rate risk. The top four gilt mutual funds which have the best ranking from Value Research and Morningstar rating agency are listed below.
IDFC Government Securities Fund
IDFC Government Securities Investment Plan Direct-Growth manages assets of 1,937 crores (AUM). The fund's expense ratio is 0.61 percent, which is comparable to the cost of most other Gilt funds.
The 1-year returns on the IDFC Government Securities Investment Plan Direct-Growth are 5.73 percent. The three years return on the fund is 12.18%. It has had an average yearly return of 9.93% since its inception. The scheme invests in government securities of various maturities in order to achieve an acceptable return while maintaining high liquidity. Morningstar has given the fund a five-star rating, while Value Research has given it a four-star rating.
Axis Gilt fund
Axis Gilt Fund Direct Plan -Growth had 147 Crores in assets under management (AUM) and is a medium-sized fund in its category. The fund's fee ratio is 0.4 percent, which is lower than the expense ratios charged by most other Gilt funds.
Axis Gilt Fund Direct Plan has a one-year growth rate of 5.75 percent. It has returned an average of 8.21% every year since its inception. The top holdings of the fund are the Government of India, Gujarat State, Reserve Bank of India, and Maharashtra State.
Morningstar has given the fund a four-star rating, while Value Research has given it a five-star rating.
DSP Government Securities fund
DSP Government Securities Direct Plan-Growth is a medium-sized fund with 432 crores in assets under management (AUM) as of 30 June 2021. The fund's expense ratio is 0.55 percent, which is comparable to the cost of most other Gilt funds. The scheme aims to create income by investing in central government assets with maturities ranging from one to thirty years.
The DSP Government Securities Direct Plan has a 1-year growth rate of 5.99 percent. It has had an average yearly return of 8.90% since its inception.
Morningstar has given the fund a five-star rating, and Value Research has also given it a five-star rating.
Edelweiss Government Securities fund
Edelweiss Government Securities Fund Direct-Growth had assets under management (AUM) of 99 Crores, making it a medium-sized fund in its category. The fund's expense ratio is 0.57 percent, which is comparable to the cost of most other Gilt funds.
The returns on Edelweiss Government Securities Fund Direct-Growth over the last year have been 8.32 percent. It has returned an average of 9.92 percent per year since its inception. The fund's top holdings are in GOI, Gujarat State.
Morningstar has given the fund a four-star rating, while Value Research has given it a four-star rating.
4 Best Performing Gilt Funds With High Ratings
|Fund||3-Year Return||Value Research||Morningstar|
|IDFC Government Securities Fund||12.18%||4-Star||5-Star|
|Axis Gilt fund||11.10||5-Star||4-Star|
|DSP Government Securities fund||11.76%||5-Star||5-Star|
|Edelweiss Government Securities fund||11.64||4-Star||4-Star|
Who Should Invest in Gilt Funds?
Gilt funds invest exclusively in government assets with medium to long-term maturities. As a result, these funds meet investors' security requirements. They differ from bond funds in that the latter may invest a portion of their assets in riskier corporate bonds. Gilt funds invest in low-risk debt instruments like government securities, ensuring capital preservation while providing moderate returns. Despite the lower return, a gilt fund has superior asset quality than a standard equities fund. It is frequently seen as a good investment shelter for risk-averse individuals seeking to invest in government assets.
Only invest in gilt funds if you can maintain track of changes in interest rates and time your entries and exits. Always keep in mind their great sensitivity to changes in interest rates in the economy. As a result, depending on the interest rate forecast, gilt schemes may begin to rise or fall. It's possible that the RBI will intervene later.
Investing in mutual funds poses a risk of financial losses. Investors must therefore exercise due caution. Greynium Information Technologies and the author are not liable for any losses caused as a result of decisions based on the article. The above article is for informational purposes only.