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Why are long-duration funds becoming popular?

After the Reserve Bank of India paused hiking interest rates, some market participants have decided to go for long tenured bonds. They anticipate that the current pause indicates peaking of interest rates.

Long duration funds (LDF) offer a bond portfolio such that the duration of the portfolio is greater than seven years. LDF are getting investors’ attention for some time now, because long-term bonds may see capital appreciation if the rates fall. The LDF category on an average has given 4.18 percent returns on a three-year basis till April 25, as per Value Research. Investors should note that investments in these schemes have high interest rate risk.

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