ThinkStock PhotosDo you want to invest in debt mutual funds for a few years, but worried about an imminent policy rate hike by RBI? Can’t take a call on the future course of interest rates? Sure, these are extremely crucial factors to consider while investing in debt mutual fund schemes, especially if you are investing for a relatively longer period of three years or more. Well, do not worry. Probably, you just need to invest in dynamic bond funds.
Mutual fund advisors typically recommend dynamic bond funds to investors who do not know or want to take the effort to know the factors that would affect their long-term debt mutual funds. These advisors say such investors should leave the job to a fund manager who would manage the money based on his view on interest rates and the market.
And dynamic bonds just do that. According to Sebi categorisation, dynamic bond funds are open-ended schemes that invest across duration. That mean the fund manager has the freedom to invest across duration and securities based on his view on the market and other factors.
Just to make your lives easier, ET.com Mutual Funds has put together a few dynamic bond schemes you can bet on to take care of your future financial goals. These schemes are: Kotak Dynamic Bond Fund, UTI Dynamic Bond Fund, Franklin India Dynamic Accrual Fund and ICICI Prudential All Seasons Bond Fund.
A word of caution, though: dynamic bond funds have been a bit jaded lately. Most of these schemes were caught unawares by the RBI move last year. So, do not just invest and forget about it. Keep track of your investments on a regular basis.
Best dynamic bond funds to invest in 2018
If you are interested to know how we selected these schemes, here is our methodology.
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 is equal to 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 is less than 0.5, the series is said to be mean reverting.
iii) When H is greater than 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.
Mutual fund advisors typically recommend dynamic bond funds to investors who do not know or want to take the effort to know the factors that would affect their long-term debt mutual funds. These advisors say such investors should leave the job to a fund manager who would manage the money based on his view on interest rates and the market.
And dynamic bonds just do that. According to Sebi categorisation, dynamic bond funds are open-ended schemes that invest across duration. That mean the fund manager has the freedom to invest across duration and securities based on his view on the market and other factors.
Just to make your lives easier, ET.com Mutual Funds has put together a few dynamic bond schemes you can bet on to take care of your future financial goals. These schemes are: Kotak Dynamic Bond Fund, UTI Dynamic Bond Fund, Franklin India Dynamic Accrual Fund and ICICI Prudential All Seasons Bond Fund.
A word of caution, though: dynamic bond funds have been a bit jaded lately. Most of these schemes were caught unawares by the RBI move last year. So, do not just invest and forget about it. Keep track of your investments on a regular basis.
Best dynamic bond funds to invest in 2018
| Scheme name | 1-yr return (%) | 3-yr return (%) |
| Kotak Dynamic Bond Fund | 3.72 | 7.61 |
| UTI Dynamic Bond Fund | 1.79 | 7.07 |
| Franklin India Dynamic Accrual Fund | 5.57 | 8.29 |
| ICICI Prudential All Seasons Bond Fund | 3.18 | 7.95 |
If you are interested to know how we selected these schemes, here is our methodology.
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 is equal to 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 is less than 0.5, the series is said to be mean reverting.
iii) When H is greater than 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.
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