ITI Ultra Short Duration Fund NFO – Is this good fund for a 6 month period?

ITI-Ultra-Short-Duration-Fund-NFO-–-Is-this-good-fund-for-a-6-month-investmentITI Ultra Short Duration Fund NFO – Review

ITI mutual fund has launched ultra short duration fund now. The ultra Short duration fund invests in debt instruments that has a maturity of 3 to 6 months. These short duration funds are considered to be better than bank FD. Post Franklin debt mutual funds fiasco, investors are concerned about investing in debt mutual funds. Should you invest in ITI Ultra Short Duration Fund NFO? What are various risk factors associated with such funds?

Also Read: These 10 Thematic Funds gave up to 160% returns in 1 year

ITI Ultra Short Duration Fund NFO issue details

This is an open ended ultra-short term debt scheme investing in instruments such that the Macaulay duration of the portfolio is between 3 months to 6 months. This fund opens for subscription on 19th April, 2021 and closes on 3rd May, 2021.

Scheme Opens 19-Apr-21
Scheme Closes 03-May-21
Scheme reopens for continuous purchase/sale Within 5 days after closing date
Minimum Lumpsum Rs 1,000
Minimum SIP Rs 1,000
NAV of the fund Rs 10 during NFO period
Entry Load Nil
Exit Load Nil
Risk Low to Moderate
Max expense Ratio (TER) 2.00%
Benchmark NIFTY Ultra Short Duration Debt Index

ITI Ultra Short Duration Fund SID

What is the investment objective of this MF scheme?

The investment objective of the Scheme is to generate regular income and capital appreciation through investment in a portfolio of short term debt & money market instruments such that the Macaulay duration of the portfolio is between 3 – 6 months.

There is no assurance or guarantee that the investment objective of the scheme will be realized.

What is the allocation pattern in this mutual fund?

This fund investment pattern is as follows:

Type of instruments Min % Max % Risk Profile
Debt and Money Market Instruments 0% 100% Low to Medium

Why to invest in the ITI Ultra Short Duration Fund?

Here are a few reasons to invest in such debt funds.

1) This funds invests in AAA/A+ rated instruments which are considered to be relatively safe investments.

2) Ultra short duration funds would invest in fixed income debt instruments which would mature in 3 to 6 months. If your objective is to invest for this period, you can invest.

3) Ultra short duration funds have provided stable returns in the past. If you are looking for returns higher than bank FDs, one can invest in such funds.

4) This fund invests in high liquid investments.

Some key risk factors you should consider before you invest in such funds

One should consider some of these risk factors / negative factors before investing.

1) Fixed income securities such as bonds, debentures and money market instruments run price-risk or interest-rate risk. Generally, when interest rates rise, prices of existing fixed income securities fall and when interest rates drop, such prices increase. The extent of fall or rise in the prices is a function of the existing coupon, days to maturity and the increase or decrease in the level of interest rates.

2) Since it invests in debt instruments, these would carry credit risk, default risk and liquidity risk. For investments in government securities, there is no credit risk.

3) The scheme may invest in fixed income derivatives up to 35% of the net assets of the scheme for the purpose of hedging and portfolio balancing purposes which there is risk.

4) You can refer complete risk factors of investing in this particular scheme in SID / KIM / NFO prospectus.

Performance of existing Ultra short duration funds

Let us look at existing funds from this segment and their performance in the short term.

Fund Name 3 Months 6 Months 1 Year
ICICI Prudential Ultra Short Term Fund 1.1% 2.1% 5.9%
HDFC Ultra Short Term Fund 1.0% 1.8% 5.5%
SBI Magnum Ultra Short Duration Fund 0.9% 1.7% 4.9%
Nippon India Ultra Short Duration Fund 1.2% 2.4% 4.9%
UTI Ultra Short Term Fund 0.9% 1.8% 4.7%
PGIM India Ultra Short Term Fund 0.9% 1.7% 4.7%
IDBI Ultra Short Term Fund 0.8% 2.0% 4.7%
Mahindra Manulife Ultra Short Term Fund 0.9% 1.6% 4.7%
HSBC Ultra Short Duration Fund 0.9% 1.7% 4.6%
IDFC Ultra Short Term Fund 0.9% 1.6% 4.5%

Also Read: This Water related Aqua Fund gave 15% annualised returns in last 5 years and 12 years

Should you invest in ITI Ultra Short Duration Fund NFO?

ITI Ultra Short Duration Fund invests in debt & money market instruments where Macaulay duration of the portfolio is between 3 months to 6 months. Ultra short duration funds can provide higher returns compared to bank fixed deposits for short term. If you have surplus funds and need to utilize this in the next 3 to 6 months, you can invest in such short duration mutual funds. One can expect 5% to 8% annualised returns, though not guaranteed.

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Suresh KP


  1. Hi Suresh ji,

    Can you please shed some light on the upcoming India Grid Trust – NCD bonds offering interest rate of 8.2%

    Thank you for considering.


  2. Hello Sir,

    How does compounding work for mutual fund?

    Can you please give an illustration for understanding purpose?

  3. The risk in these type of Short term debt funds is default risk by the organization issuing the Instruments. As rightly pointed by Mr. Suresh if it is Government Securities there is no risk. We have to see the composition of their investment in debt instruments Government,PSU,Public Sector Banks and Private Sector.

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