Maturity Profile: This parameter helps to understand what percentage of the fund’s asset invest in which maturity bonds, and to what extent the fund is exposed to the interest rate risk. In a falling interest rate scenario, debt funds maintain relatively higher portfolio maturities and vice versa.
Credit Risk and Credit Rating Profile: Debt funds can invest in securities with different credit ratings, as per the schemes investment strategy. These ratings are assigned by different rating agencies and indicate the credit worthiness of the borrower. Higher the rating, higher is the creditworthiness of the borrower, although the returns may be lower as compared to a bond issued by an entity that has a lower rating.
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Duration of portfolio: The duration is the measure of the price sensitivity of the portfolio to a change in interest rates. Funds with a longer duration would be more sensitive to a given change in interest rates. For example, if interest rates were to go down (or up) by 1% in a month, the Net Asset Value (NAV) of Bond fund is likely to go up (or down) by 5 per cent if modified duration of portfolio is mentioned as 5 years.
Yield: The yield is a measure of the interest income generated by the bonds in the portfolio. The yield to maturity of a debt fund indicates the running yield of the fund. Debt funds are total return products returning both accrual of interest and mark to market gain or losses.
