Ideal Time to Shift to Accrual Oriented Funds

KOCHI:
At a time when scope for further rate cuts is limited, investors are looking towards short term income funds to gain from high accrual coupled with income stability due to lower duration.
One such fund is UTI Short Term Income Fund which aims to generate reasonable returns with low risk and high liquidity from a portfolio of money market securities and high quality of debt with a maturity cap of 4 years. The fund attaches importance to high credit quality and portfolio diversification.
Sudhir Agrawal, fund manager of UTI Short Term Income Fund says, “After 150 bps cut in policy rate by RBI during last 15 months, scope for further rate cuts in next 3-6 months may be limited. Also, due to RBI’s intention to move the liquidity deficit to neutral, we expect yield curve to steepen in next few months.
Hence, investors should start shifting focus to short term income funds as these funds offer high accrual along with lower volatility. We have been recommending investors to look at our short term income fund with an investment horizon of 1 to 3 years. Apart from the high accrual income in this fund, investors can look to gain from capital appreciation also if any further room emerges for rate cuts in next 3-6 months.”
UTI Short Term Income Fund has been consistently outperforming its benchmark CRISIL Short-Term Bond Fund Index. Fund has given a return of 9.07% against its benchmark return of 7.87% since inception(as on June 30, 2016).