NFO Pick – (Edelweiss Low Duration Fund)

10 Mar 2025 , 09:53 AM

WHAT IS EDELWEISS LOW DURATION FUND ALL ABOUT?

The Edelweiss Low Duration Fund is a quasi-savings fund that invests in debt instruments with Macaulay Duration of between 6 months and 1 year. This enables them to offer returns with moderately low risk that is above what bank savings and liquid funds can offer. At the same time, the interest rate risk of these funds is much lower than long duration funds. Hence, the performance of the low duration fund is more predictable and can be used for committed payouts in future. The main aim of the Low Duration Fund is to maintain a balance between safety and liquidity. In short, the fund aims to provide optimal returns at moderately low levels of risk. Although debt funds are now treated as income and taxed at the incremental rate of tax, this duration play makes them more lucrative than savings accounts and very short duration liquid funds.

WHY TO INVEST IN EDELWEISS LOW DURATION FUND?

There are several compelling reasons for investors to commit funds to the Edelweiss Low Duration Fund.

• Even in post-tax terms, these low duration funds can generate around 5.0% returns at 30% tax. This makes a much more attractive as a savings avenue, compared to banks.
• One of the building blocks of financial planning is creation of an emergency fund that is liquid, yet with good The low duration fund perfectly fits into that definition.
• Since returns on low duration funds are less volatile, they are good options to plan for committed payments like school fees, advance tax payments, etc.

The low duration fund can be a good choice for parking savings in a relatively low risk and liquid asset class, in a way that optimizes short term returns.

HOW LOW DURATION FUNDS HAVE PERFORMED IN INDIA

In India, there are a total of 20 Low Duration Funds managing a total corpus of ₹1,13,466 Crore. The table below has ranked the top-10 low duration funds by 1-year returns.

Scheme Name	6-Month (%) Regular	1-Year (%) Regular	3-Years (%) Regular	Daily AUM (₹ in Crore)
ICICI Prudential Savings Fund	7.23	7.76	7.06	21,816.22
Axis Treasury Advantage Fund	7.16	7.49	6.57	5,948.76
UTI Low Duration Fund	7.05	7.47	6.63	3,220.42
DSP Low Duration Fund	6.99	7.30	6.37	4,898.07
Tata Treasury Advantage Fund	7.02	7.29	6.33	2,373.43
Invesco India Low Duration Fund	6.98	7.27	6.35	1,503.41
HDFC Low Duration Fund	6.73	7.25	6.41	18,385.33
HSBC Low Duration Fund	6.78	7.25	6.35	538.2
JM Low Duration Fund	6.94	7.25	6.20	226.6
Bandhan Low Duration Fund	7.00	7.24	6.33	5,458.31

Data Source: AMFI

Here are some key takeaways from the data on 20 low duration funds in India.

• Over a 6-month time frame, the low duration funds have given maximum returns of 7.23% and minimum returns of 6.56%. Average Returns were 6.87%.
• Over a 1-Year time frame, the low duration funds have given maximum returns of 7.76% and minimum returns of 6.85%. Average Returns were 7.21%.
• Over a 3-Year time frame, the low duration funds have given maximum returns of 7.06% and minimum returns of 6.03%. Average Returns were 6.31%.

The low duration funds have generated solid returns for investors with very low volatility risk. Even considering 31.2% tax, these funds beat savings accounts by a big margin.

GLANCE AT THE EDELWEISS LOW DURATION FUND NFO

Here are key details of the Edelweiss Low Duration Fund NFO.

• The NFO opens on March 11, 2025 and closes on March 18, 2025. Regular sale and repurchase of units at NAV linked prices will start within 15 days after closure.
• On the risk-o-meter, Edelweiss Low Duration Fund is classified as “Moderately Low Risk Fund” with a high focus on protection of principal.
• Investment objective is to offer an alternate to saving accounts by investing in bonds with Macaulay Duration of between 6 months and 12 months.
• There is no entry load. Being a debt fund with focus on liquidity, there will also be no exit load on withdrawals. Being a debt fund, there is no STT charged on redemption.
• Edelweiss Low Duration Fund offers Regular and Direct plans. Additionally, the fund also offers the Growth option and the IDCW option to investors. Pranavi Kulkarni and Rahul Dedhia will be the designated fund managers for the fund.
• The minimum application in the NFO will be ₹5,000 and in multiples of ₹1. The fund will be benchmarked to the Nifty Low Duration Debt Index.
• Edelweiss Low Duration Fund, being a pure debt fund, will not have any STCG / LTCG classification. Irrespective of holding period, the gains will be treated as income and taxed at the incremental rate of return.

The Edelweiss Low Duration Fund offers a template for parking funds for the short term in an avenue that offers higher risk-adjusted returns compared to bank deposits.