Debt schemes can be categorised as low duration funds, short duration funds, medium duration funds, long duration funds, etc. based on their maturities. The medium duration funds, as the name suggests, hold a maturity lower than short duration funds and higher than long duration funds.<\/p>\n\n\n\n

According to the SEBI mandate, medium duration funds will invest primarily in debt and money market instruments with a Macaulay duration of 3-4 years. Notably, the bond prices are inversely related to the interest rates and any changes in interest rates, due to positive or negative economic cycles over time, will affect the performance of the fund.<\/p>\n\n\n\n

The medium duration fund tends to do well when interest rates are expected to remain stable or decline. When it comes to interest rate risk, medium duration funds are riskier compared to short duration funds, but less risky when compared to long duration funds. Hence, fixed income investors seeking to invest in medium duration funds should be able to tide over the market volatility with a moderate to high-risk appetite.<\/p>\n\n\n\n

The Reserve Bank of India (RBI) came into action to support the economic slowdown and took measures to reduce the policy rates. With the uncertainty of growth expected to continue for most part of the FY2021-22. RBI is likely to stay growth supportive by maintaining the current low policy rates and surplus systemic liquidity.<\/p>\n\n\n\n

Looking at this scenario, Invesco Mutual Fund<\/a> identified a new opportunity in the 3-5 years segment and launched Invesco India Medium Duration Fund<\/strong>. It is an open-ended medium term debt scheme investing in instruments such that the Macaulay duration of the portfolio is between 3-4 years.<\/p>\n\n\n\n

Mr Saurabh Nanavati, CEO at Invesco Asset Management (India) Pvt. Ltd. has stated, “Fixed-income investments play a vital role in every investment portfolio, besides generating stable income they also help in reducing overall portfolio risk as they are less volatile and have a low correlation with equity market returns. The new fund launched is aimed at capturing the current market opportunities both on the yield curve as well as on the credit market.”<\/em><\/p>\n\n\n\n

“If you look at the current fixed income markets, the yield curve has steepened during pandemic; at the short end, yields have moved sharply lower on account of ample systemic liquidity & accommodative monetary policy stance; while the long end of the curve has still remained elevated due to higher fiscal concerns, though anchored by RBI through various tools like Government Securities Acquisition Program (G-SAP). With this backdrop in mind, we believe the 3-5 years segment, which offers high accrual, presents itself as an attractive investment opportunity from risk-reward perspective. Investors with a medium to a long term horizon with moderate risk appetite can consider investing in this fund.”<\/em> He added further.<\/p>\n\n\n\n

Table 1: Details of Invesco India Medium Duration Fund<\/em><\/strong><\/p>\n\n\n\n