Edelweiss Short Duration Index Fund: Who can invest?

Published: January 28, 2023 at 6:00 am

Edelweiss CRISIL IBX 50:50 Gilt Plus SDL Short Duration Index Fund is an open-ended debt Index Fund investing in the constituents of CRISIL IBX 50:50 Gilt Plus SDL Short Duration Index. The fund is classified as having “relatively high-interest rate risk and relatively low credit risk”.

Let us consider the salient features of the fund. The index will comprise 50% gilts and 50% State Development Loans (SDLs) spread among four duration buckets: 1-2 years, 2-3 years, 3-4 years and 4-5 years.

Therefore investors should immediately appreciate that the “short-term” in the fund’s name is relative to a typical long term gilt fund.

The fund presentation says the index, as of Dec 31st 2022, has a yield to maturity of 7.34%. This does not mean an NFO investor in this fund will get a return close to this number. That would depend on market demand vs supply factors. The NAV volatility would be intermediate between a liquid fund and a long-term gilt fund.

Interested investors must also not expect the  NAV volatility to decrease, like in the case of target maturity mutual funds. Edelweiss Short Duration Index Fund is an open-ended index fund. Meaning it always invests in bonds of 1-5 duration. Therefore the modified duration (a measure of interest rate sensitivity) will not decrease with time. It is currently pegged at 2.63 years.


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    To appreciate the fund’s interest-rate sensitivity, the modified duration of the PPFAS Liquid fund is 0.1 years, SBI Magnum Constant Maturity Fund is 6.66 years, and HDFC Corporate Bond Fund is 2.5 years.

    So Edelweiss Short Duration Index Fund will be significantly more volatile than a liquid fund, relatively less volatile than a long term gilt fund and about as volatile as corporate bond funds.

    Who can invest in Edelweiss Short Duration Index Fund?

    • Suppose you are looking for a debt fund to be part of your long term (> ten years) accumulation portfolio. In that case, this fund can be considered if you cannot handle excessive debt NAV volatility like in gilt funds and prefer a higher credit rating than corporate bond funds.
    • Note: Do not make the mistake of expecting a fixed return from any debt fund! That would only lead to disappointment. Unless you are ready to accept that debt returns are uncertain and prone to demand vs supply risks, do not invest in any debt fund!
    • We do not recommend using Edelweiss Short Duration Index Fund for short-term needs – for 3Y, 5Y, 7Y etc. The NAV volatility will render the returns too uncertain.
    • Keep in mind that just because a bond portfolio credit quality is high, it does not mean its NAV will be steady! There is always a price to pay! This risk is manageable over the long term (> 10Y).
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