IDFC Gilt Index Funds 2027, 2028 Review

Published: March 12, 2021 at 10:43 am

Last Updated on March 12, 2021 at 10:43 am

In this article, we review a pair of yet another open-ended target maturity index fund: IDFC Gilt 2027 Index Fund and IDFC Gilt 2028 Index Fund. These come hard on the heels of Edelweiss Nifty PSU Bond Plus SDL Index Fund – 2026. It is good to see AMC’s wake up to the benefits of reducing interest rate risk (aka duration risk) by setting a maturity date – an idea we expressed in Nov 2018: Open Letter to AMCs: Why are you not pushing risk-free debt funds enough?

How do open-ended target maturity funds work? Let us consider debt funds that invest only in gilts (central govt bonds) and a little cash. This eliminates discuss of credit rating changes or credit defaults (govt bonds do not have a credit rating for local investments!).

Consider an open-ended gilt fund. The fund manager will continuously buy and sell gilts as per market demand and supply movements to register a capital gain (or loss) in the portfolio. Investors can continuously buy and sell units.

There is no credit risk, but the longer the duration of the bonds held in the portfolio, the higher the interest rate risk aka duration risk. If interest rates increase suddenly (or is expected to be hiked), the demand for existing bonds will decrease and their price will fall. The NAV of the fund holding these would also fall.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥

The fall in the price of a 1-month bond would be lower than that in a 10Y bond. This is why liquid funds are less volatile than medium-duration or long-duration funds.

The point that we must focus on here is, in a normal open-ended gilt fund. this interest rate risk will always be present. Giving the funds a target maturity date – after which the fund will stop operations and give the money back to unitholders -effectively eliminates this interest rate risk to unitholders who do not redeem until maturity.

Also, the magnitude of the interest risk decreases with each passing year. Let us consider the two IDFC NFOs as examples:

  • IDFC Gilt 2027 Index Fund tracking the CRISIL Gilt 2027 Index matures on June 30th 2027
  • IDFC Gilt 2028 Index Fund tracking the CRISIL Gilt 2028 Index matures on April 5th 2028

The current average portfolio maturity of the CRISIL Gilt 2027 (2028) Index is 5.97 years (6.60 years). With each passing year, these nos will decrease. Higher the average portfolio maturity, higher the duration risk, higher the fluctuations in NAV.

By setting a maturity date for an open-ended fund, the duration risk reduces with time and is almost negligible upon maturity. For an investor starting a SIP, the volatility of each sequent instalment will reduce (this does not mean higher returns). The open-ended allows free in and outflow of funds by the investor.

Broadly, the AMCs ideas seem to be the following: Choose 6/7 year G-secs as they have a high yield currently and combine them with T-bills that will be changed every three months. So if the rates increase in future, the newer T-bills will have a higher coupon rate. This is known as a barbell strategy.

  • CRISIL Gilt 2027 Index: Yield 6.17%, Avg Maturity 5.97 years
  • CRISIL Gilt 2028 Index: Yield: 6.27%, Avg Maturity 6.6 years.
  • Both indices will have a mix of 98% 6-7 year gilts and 2% of 91-day treasury bills (T-bills). They will buy and hold these bonds until maturity.

Note: As discussed in the review of Edelweiss Nifty PSU Bond Plus SDL Index Fund – 2026, these are the current yields. Since the fund is open-ended, in and outflows will affect yields along with future interest rates of the T-bills.  The NAV will also be significantly volatile in the first few years and then gradually decreasing.

Who can consider investing in IDFC Gilt index funds?

If you do not expect to redeem before the above-mentioned due dates, do not mind the intermittent volatility, you can consider investing some amount in these funds (lump sum/ occasional/periodic investing). However, do not use only these funds for your intended goals.

Do share this article with your friends using the buttons below.

🔥Enjoy massive discounts on our courses, robo-advisory tool and exclusive investor circle! 🔥& join our community of 5000+ users!
Use our Robo-advisory Tool for a start-to-finish financial plan! More than 1,000 investors and advisors use this!
New Tool! => Track your mutual funds and stock investments with this Google Sheet!
We also publish monthly equity mutual funds, debt and hybrid mutual funds, index funds and ETF screeners and momentum, low-volatility stock screeners.
Follow Freefincal on Google News
Follow Freefincal on Google News
Subscribe to the freefincal Youtube Channel. Subscribe button courtesy: Vecteezy.
Subscribe to the freefincal Youtube Channel.
Follow freefincal on WhatsApp Channel
Follow freefincal on WhatsApp
Podcast: Let's Get RICH With PATTU! Every single Indian CAN grow their wealth! 
Listen to the Lets Get Rich with Pattu Podcast
Listen to the Let's Get Rich with Pattu Podcast
You can watch podcast episodes on the OfSpin Media Friends YouTube Channel.
Lets Get RICH With PATTU podcast on YouTube
Let's Get RICH With PATTU podcast on YouTube.
🔥Now Watch Let's Get Rich With Pattu தமிழில் (in Tamil)! 🔥
  • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
  • Have a question? Subscribe to our newsletter using the form below.
  • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

Join over 32,000 readers and get free money management solutions delivered to your inbox! Subscribe to get posts via email!

About The Author

Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over ten years of experience publishing news analysis, research and financial product development. Connect with him via Twitter(X), Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3,000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
Our new book for kids: “Chinchu Gets a Superpower!” is now available!
Both boy and girl version covers of Chinchu gets a superpower
Both the boy and girl-version covers of "Chinchu Gets a superpower".
Most investor problems can be traced to a lack of informed decision-making. We made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So, in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it, as well as teaching him several key ideas of decision-making and money management, is the narrative. What readers say!
Feedback from a young reader after reading Chinchu gets a Superpower (small version)
Feedback from a young reader after reading Chinchu gets a Superpower!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook is for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Do you want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or get the Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low-volatility stock screeners.
About freefincal & its content policy. Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified with credible and knowledgeable sources before publication. Freefincal does not publish paid articles, promotions, PR, satire or opinions without data. All opinions will be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is an in-depth dive into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically, with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)