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Low-risk investors have a higher inclination toward fixed-income securities as they offer a decent rate of return, beating the conventional fixed deposits (FDs) but with lesser volatility than equities. However, just like equities, handpicking bonds for your portfolio is not everyone’s cup of tea, owing to the complexity of the bond market.
Hence, for not-so-savvy investors, going the route of mutual funds is generally a better option. If you are looking to add some top-performing debt mutual funds to your portfolio, here is a list of two such funds that have delivered a 13%+ CAGR over the last 3 years. By the standard of a debt fund, this kind of return is extremely good and should not be compared with the returns of an equity fund.
Bank of India Credit Risk Fund
A quick brief – A credit risk fund is a debt fund that aims to invest in slightly low-rated companies which makes it riskier but also results in higher returns. Bank of India Ltd’s (NS:) Credit Risk Fund is of such type, having a very small asset under management (AUM) of INR 165 crores. As of December 2022, 81.7% of the fund size was allocated towards corporate debt, while the remaining was in cash and equivalents.
The most concentrated sector in the portfolio is diversified chemicals with a 17.93% allocation. Some of the highest-weighted bonds are of Steel Authority of India Limited (NS:), Century Textiles & Industries Limited (NS:), Piramal Capital & Housing Finance Limited, etc. The fund has delivered a 3-Year CAGR of a mouth-watering 14.15%!
Aditya Birla SL Medium Term Plan
The next fund is from Aditya Birla Sun Life AMC Ltd (NS:) – Aditya Birla SL Medium Term Plan that has an AUM of INR 1,636 crores. The fund has high-quality corporate bonds, government securities (G-sec) as well as money market instruments such as Certificate of Deposit (CDs). G-secs are the highest weighted in the portfolio, with an allocation of 25.3%, as of December 2022, up from 17.47% in December 2021.
The expense ratio is a decent 0.81% and the benchmark of the fund is CRISIL (NS:) Medium Term Debt Index. It has delivered a return at a 3-Year CAGR of 13.82% making it one of the best options currently available for low-risk investors.
Disclaimer – This article is not a recommendation to buy/sell/hold any of the above-mentioned securities.
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