We know that investment in equity generates high returns. On the other side, fixed income options like bank FDs provide low interest rates. One of the best way to invest to get higher returns from debt segment is to invest in debt mutual funds. There are over 290 odd debt mutual fund schemes and is difficult to pick the right one. If you are looking for debt mutual funds that generated highest SIP returns, this article is for you. ย In this article we would provide Top 5 Debt Mutual Funds that generated highest SIP returns in the last 10 years and our view about such funds.
Also Read: 5 Equity Mutual Funds with Highest SIP returns in last 10 years
What are Debt Funds?
Skip this section if you are already aware about it.
Debt fund is a mutual fund scheme that invests in fixed income instruments, such as Corporate and Government Bonds, corporate debt securities, and money market instruments etc. which offer capital appreciation. These debt mutual funds funds are also referred to as Income Funds or Bond Funds.
How we filtered these Debt Mutual Funds?
Below criteria is applied.
1) Considered all types of debt mutual funds like short term funds, medium term debt funds, long term debt funds, Gilt funds, corporate bond funds, dynamic bond funds, liquid funds etc., We have excluded credit risk funds as these are very high risk and sometimes can show abnormal positive or negative returns. We have also excluded debt funds that came in < 5 year period.ย We could get 192 mutual funds after this filter.
2) We have further filtered these funds that generated highest SIP returns in the last 10 years. We could see ABSL Medium Term Duration fund being highly volatile and generated -6% to 21% returns and average of 13% returns in last 1 year. We have excluded even this fund.
3) Finally we could filter 5 debt mutual funds that generated highest SIP returns between 8.3% to 8.9%. Out of this there is all seasons bond funds, 1 medium duration fund and 3 Gilt funds.
List of Debt Mutual Funds with Highest SIP Returns in last 10 years
Here is the list of debt funds with highest SIP returns.
#1 – ICICI Prudential All Seasons Bond Fund
#2 – SBI Magnum Medium Duration Fund
#3 – Nippon India Gilt Securities Fund
#4 – SBI Magnum Gilt Fund
#5 โ ICICI Pru Gilt Fund
5 Debt Funds with Highest SIP Returns in 10 years โ Detailed View
Let us get into more info about these funds.
#1 – ICICI Prudential All Seasons Bond Fund
The objective of the fund is to generate income through investing in a range of debt and money market instruments of various duration while maintaining the optimum balance of yield, safety and liquidity.
Where does this scheme invest currently?
Currently, it invests in Govt securities 48%, AAA rated bonds 11%, AA rated bonds 34% and balance in A+ rated bonds.
Performance of the Fund
SIP Returns
3 Year SIP Returns โ 6%
5 Year SIP Returns โ 7.5%
10 Year SIP Returns โ 9%
Annualised Returns
1 Year Returns โ 5.9%
3 Year Annualised Returns โ 7%
5 Year Annualised Returns โ 8.3%
10 Year Annualised Returns โ 9.9%
Our view: ย This dynamic bond fund has the average credit quality of AAA with Yield to Maturity as 8.15%. This fund outperformed its peers in the last 3 to 10 years time frame and generated 9% SIP returns and 9.9% annualised returns in the last 10 years. Moderate risk investors who want to invest for 3+ years can invest in this debt fund.
#2 – SBI Magnum Medium Duration Fund
The objective of the fund to provide investors an opportunity to generate attractive returns with moderate degree of liquidity through investments in debt and money market instruments such that the Macaulay duration of the portfolio is between 3 years – 4 years.
Where does this scheme invest currently?
Currently it invests in Govt securities 27%, AAA rated bonds 23%, AA rated bonds 41%, A+ rated bonds 1.7%, A and below rated bonds 3.3% and balance in cash.
Performance of the Fund
SIP Returns
3 Year SIP Returns โ 5.2%
5 Year SIP Returns โ 6.9%
10 Year SIP Returns โ 8.5%
Annualised Returns
1 Year Returns โ 4.2%
3 Year Annualised Returns โ 6.4%
5 Year Annualised Returns โ 7.9%
10 Year Annualised Returns โ 9.2%
Our view: ย This medium duration debt fund even has the average credit quality of AAA with Yield to Maturity as 8.04%. This fund outperformed its peers in the last 3 to 10 years time frame and generated 8.5% SIP returns and 9.2% annualised returns in the last 10 years. Moderate risk investors who want to invest for 3-4 years and above can invest in such debt funds.
#3 – Nippon India Gilt Securities Fund
The investment objective of the fund is to generate optimal credit risk-free returns by investing in a portfolio of securities issued and guaranteed by the Central and State governments.
Where does this scheme invest currently?
Currently, it invests in Govt securities 93% and the balance is held in cash.
Performance of the Fund
SIP Returns
3 Year SIP Returns โ 4%
5 Year SIP Returns โ 6.3%
10 Year SIP Returns โ 8.4%
Annualised Returns
1 Year Returns โ 3.5%
3 Year Annualised Returns โ 5.2%
5 Year Annualised Returns โ 8.4%
10 Year Annualised Returns โ 9.05%
Our view: ย This gilt fund invests in government securities these comes with zero default risk. Current Yield to Maturity as 7.5%. This fund outperformed its peers in the last 3 to 10 years time frame and generated 8.4% SIP returns and 9.05% annualised returns in the last 10 years. One should note that gilt funds are highly volatile in the short term or medium term or long term. If you are looking for zero default risk debt funds to invest for long term, then you can consider this gilt fund. One can expectย 7% to 8% annualised returns though these are not guaranteed.
#4 – SBI Magnum Gilt Fund
The investment objective of the fund to provide returns to the investors generated through investments in Government securities issued by the Central Government and/or State Government(s).
Where does this scheme invest currently?
Currently, it invests in Govt securities 84% and the balance is held in cash.
Performance of the Fund
SIP Returns
3 Year SIP Returns โ 4.8%
5 Year SIP Returns โ 6.9%
10 Year SIP Returns โ 8.3%
Annualised Returns
1 Year Returns โ 5.1%
3 Year Annualised Returns โ 6%
5 Year Annualised Returns โ 8.3%
10 Year Annualised Returns โ 9.15%
Our view: ย Even this gilt fund invests in government securities which have zero default risk. Current Yield to Maturity as 7.07%. This fund outperformed its peers in the last 3 to 10 years time frame and generated 8.3% SIP returns and 9.15% annualised returns in the last 10 years. As indicated in the above section, gilt funds are highly volatile in the short term or medium term or long term. If you are looking for zero default risk debt funds to invest for long term, then you can consider this gilt fund. One can expectย 7% to 8% annualised returns though these are not guaranteed.
Also Read: 5 Equity Funds with 1 Year Returns of up to
#5 – ICICI Prudential Gilt Fund
The investment objective of the fund to to generate income primarily through investment in Gilts of various maturities.
Where does this scheme invest currently?
Currently, it invests in Govt securities 82% and the balance is held in cash.
Performance of the Fund
SIP Returns
3 Year SIP Returns โ 5.3%
5 Year SIP Returns โ 7.1%
10 Year SIP Returns โ 8.3%
Annualised Returns
1 Year Returns โ 5.4%
3 Year Annualised Returns โ 6.5%
5 Year Annualised Returns โ 8.5%
10 Year Annualised Returns โ 8.5%
Our view: ย Even this gilt fund invests in government securities these comes with zero default risk. Current Yield to Maturity as 7.56%. This fund outperformed its peers in the last 3 to 10 years time frame and generated 8.3% SIP returns and 8.5% annualised returns in the last 10 years. As indicated in the above section, gilt funds are highly volatile in the short term or medium term or long term. If you are looking for zero default risk debt funds to invest for long term, then you can consider this gilt fund.
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please write about target maturity fund and their tax treatment