Bank fixed deposits (FDs) are a popular choice for people looking for safe investments with guaranteed returns. However, the returns on FDs are often lower and can seem weaker when inflation is considered. While equity mutual funds provide higher returns, not everyone is comfortable with the risks involved in stock market investments. For investors looking for lower risk and better returns than FDs, debt funds are a great option. One such standout is the HDFC Long Duration Debt Fund, which has delivered strong returns while maintaining a moderate risk profile.
Outstanding Performance of HDFC Long Duration Debt Fund
HDFC Long Duration Debt Fund, a product of HDFC Mutual Fund, has outperformed expectations since its launch. Over the past year, the direct plan of this debt fund has given a return of 14.48%, much higher than traditional bank FDs. Most of the fund’s portfolio is invested in government bonds, making it a safer choice for conservative investors. Here’s a detailed look at the key features and strategy of this fund.
Key Features of HDFC Long Duration Debt Fund
HDFC Long Duration Debt Fund is an open-ended debt scheme aimed at long-term investors. The fund primarily invests in government securities, minimizing risk for investors. Below are some important details:
- 1-Year Return (Direct Plan): 14.48%
- Benchmark: Nifty Long Duration Debt Fund Index – A-III
- Benchmark’s 1-Year Return: 11.82%
- Portfolio: 98.69% invested in government bonds
- Assets Under Management (AUM): ₹5,106.16 crore (as of 14 October 2024)
- Scheme Launch Date: 20 January 2023
- Minimum SIP Investment: ₹100
- Risk Level: Moderate
- Expense Ratio (Direct Plan): 0.25%
- Expense Ratio (Regular Plan): 0.60%
- Entry and Exit Load: None
Investment Strategy Focused on Government Bonds
The investment strategy of HDFC Long Duration Debt Fund revolves around long-term government bonds. The fund is designed for investors with a long-term horizon, focusing on securities with a Macaulay duration of over 7 years. This longer duration helps provide better returns while keeping the capital relatively safe, making it a good option for those looking for stability and moderate risk.
Why Choose HDFC Long Duration Debt Fund Over Bank FDs?
Bank FDs typically offer returns ranging from 6% to 7% over a 1-year period. In comparison, the HDFC Long Duration Debt Fund has delivered a return of 14.48% in the last year, making it a more attractive option. Despite fluctuations in interest rates and inflation, this debt fund has managed to outperform traditional FDs.
Unlike FDs, the returns in debt funds are not fixed, but their potential to offer better returns makes them a compelling option for investors who are looking for higher returns without taking on the significant risk of equities.
Who Should Consider Investing in This Debt Fund?
If you’re someone who is looking for a long-term investment, typically for 3 to 5 years, this debt fund can be a good choice. It’s especially suitable for investors who wish to avoid the high risks associated with equity markets but still want to earn returns that can beat inflation. However, do remember that unlike FDs, the returns in debt funds are not guaranteed and can vary based on market conditions.
Meet the Fund Managers
- Shobhit Mehrotra: Senior Fund Manager with 30 years of experience in managing debt funds.
- Dhruv Muchal: Equity Analyst and Fund Manager with expertise in analyzing market trends.
These experienced managers work to ensure the fund balances risk and returns effectively, making it a trustworthy option for cautious investors.
Final Thoughts
HDFC Long Duration Debt Fund has proven to be a strong performer in the debt fund category. With its moderate risk and impressive returns, it stands out as a solid alternative to traditional bank FDs for long-term investors looking for a safer yet rewarding investment option.
