Best Debt Funds - A Quick Glance
It’s unfortunate that the Indian debt markets aren’t as evolved as their Western counterparts yet. A lot of the dabblers assume debt to be a slow game, in comparison with equity, especially with quasi-emerging markets in mind. The latter is true in parts, owing to pace of de-regulation in bond markets and a sense of skepticism associated with some highly (highly!) dangerous debt products - nefarious enough to see Western investment banks literally implode. The truth though is that for the Western world looking for a reason for that collapse, they need only look at a mirror!
But, let’s focus on India here. Recently, HDFC opened a new line of financing for top quality Indian companies by issuing and listing the first ever ‘Masala bonds’ on the LSE - an INR 30 billion 3 year bond that saw healthy foreign participation, helping the company widen it’s own investor base and significantly reduce cross currency risk, a noteworthy effort indeed - a loud bugle to other top rated names to follow suit.
As our own corporates open up the INR bond market to global participation, let us take a quick look at some of our bond funds and how they stack up. Investors looking for exposure to the debt sector assume (and assume wrongly), as previously indicated that debt is a slow game - blame it on pulp fiction like Wall Street that glorified equity as never before or since. ‘Greed is Good’ is a game that applies to debt just as well! Let’s keep it simple though.
A Disclaimer upfront - No guarantees dear brothers and sisters - this is the world of finance!
1. Birla Sun Life Dynamic Bond Fund
An actively managed well diversified bond fund which falls under the category of ‘medium term debt funds’ - these guys know their stuff. No junk bond investments here - expect corporates of the highest quality. Recommended even for slightly higher time horizons.
2. HDFC High Interest Fund
Yet again, an actively managed fund, meaning your fund manager has the authority to take calls on your behalf. An ideal debt instrument to possess in one’s arsenal. Solid, sticky and stodgy components that are unlikely to crash unless of course there is a major financial calamity.
3. ICICI Prudential Dynamic Bond Fund
A ranked outperformer consistently, this one’s been highly recommended for its in-house managerial and research strength and the ability to modulate the portfolio accordingly, among others. Another must-have.
4. Axis Income Fund
While not at the top of our list, this is a fair hold, going by past performance. It’s above decent returns have stemmed from a slight skew towards highly rated debentures and Govt. of India Securities. A sturdy name, nevertheless.
5. HDFC Income Fund
Another solid name to round off our top 5, the key though is to keep an eye on its performance. It’s got all the good things a bond fund needs going for it - so go ahead and give it a shot if you have the dough to spare.