Investors should beware of high volatility in long-duration funds

Investors who wish to take a duration risk now should do so through dynamic bond funds rather than long-duration funds

Sanjay Kumar Singh 

Long-duration funds are showing a category average return of 16.75 per cent over the past year, according to fund tracker Value Research. However, experts say that with bulk of the rally now behind, investors should be cautious on this category.

Long-duration funds, according to the Securities and Exchange Board of India’s (Sebi’s) definition, have an average duration of more than seven years. They tend to be highly sensitive to interest-rate changes. Over the past year, the yield on the 10-year government bond has fallen from 7.89 per cent to 6.57 per cent, a decline of 132 ...

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First Published: Wed, July 10 2019. 00:22 IST