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Ideal Time to Shift to Accrual Oriented Funds

In Business
April 11, 2019

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 average 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 50 bps cut in policy rate by RBI in last few months, there is a very limited scope for further rate cuts in near future. As CPI inflation in expected to pick up towards end of this year, we may not see a deeper rate cut cycle. Also, due to RBI’s commitment to keep the system liquidity at neutral, we expect short end of the yield curve to remain supported going forward. Hence, investors should continue investing in 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 due to comfortable liquidity situation 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 8.58% against its benchmark return of 7.76% since inception(as on March 31, 2019).