These schemes are mandated to invest at least 80% of their corpus in the highest-rated companies. This makes them relatively safer than other debt schemes such as credit risk funds. They are also safer than gilt funds and long term debt funds that are highly sensitive to interest rate changes in the economy.
You should pay attention to these two factors: safety and interest rates. Safety became a crucial factor for debt fund investors after a series of defaults and downgrades in the debt space almost three years ago. The shutting down of six schemes by Franklin Templeton Mutual Fund shook conservative investors in debt schemes. Though the environment is much better now, you should still be very cautious.
Best MF to invest
Looking for the best mutual funds to invest? Here are our recommendations.
The second factor of interest rate changes assumes significance at the current juncture. The central banks were in the process of policy tightening in the world over. Now, they may stop hiking rates or start cutting rates in the coming months. This could result in better returns from debt funds.
Don't think that corporate bond funds do not have any risk. Sure, the highest rating of AAA offers you higher safety. But make sure your fund manager is not taking any extra risk to make extra returns.
There are no changes in the recommendation list this month. If you are investing in these schemes, you can relax and continue with your investments. Follow our monthly updates regularly.
Best Corporate Bond Funds to invest in 2023:
- HDFC Corporate Bond Fund
- Aditya Birla Sun Life Corporate Bond Fund
- ICICI Prudential Corporate Bond Fund
- Sundaram Corporate Bond Fund
ETMutualFunds has employed the following parameters for shortlisting the debt mutual fund schemes.
1. Mean rolling returns: Rolled daily for the last three years.
2. Consistency in the last three years: Hurst Exponent, H is used for computing the consistency of a fund. The H exponent is a measure of randomness of NAV series of a fund. Funds with high H tend to exhibit low volatility compared to funds with low H.
i)When H = 0.5, the series of return is said to be a geometric Brownian time series. These type of time series is difficult to forecast.
ii)When H <0.5, the series is said to be mean reverting.
iii)When H>0.5, the series is said to be persistent. The larger the value of H, the stronger is the trend of the series
3. Downside risk: We have considered only the negative returns given by the mutual fund scheme for this measure.
X =Returns below zero
Y = Sum of all squares of X
Z = Y/number of days taken for computing the ratio
Downside risk = Square root of Z
4. Outperformance: Fund Return – Benchmark return. Rolling returns rolled daily is used for computing the return of the fund and the benchmark and subsequently the Active return of the fund.
Asset size: For debt funds, the threshold asset size is Rs 50 crore
(Disclaimer: past performance is no guarantee for future performance.)
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