What are gilt funds

What are gilt funds?

Gilt funds are debt mutual fund schemes that invest predominantly in government securities issued by the central and state governments. These funds carry minimal credit risk, as the securities are backed by the government, making them a safer option compared to corporate debt instruments.

They aim to deliver moderate returns while preserving capital, and are suitable for conservative investors with a medium-term horizon who prioritise safety over high yield.

Key features of gilt funds

  • Invest only in government securities (G-Secs)
  • Virtually no credit risk; returns influenced by interest rate movement
  • Suitable for investors with low to moderate risk appetite
  • May show NAV volatility if interest rates fluctuate

What if...

ScenarioExplanation
You want a very safe debt optionGilt funds avoid corporate bonds and rely only on government-backed instruments.
Interest rates fallGilt funds tend to perform well as bond prices rise with falling rates.
You’re holding for the short termThese funds may show price fluctuations and are more suitable for 3+ year periods.
You compare with liquid fundsGilt funds may offer better returns but with slightly higher duration risk.
Gilt funds are ideal if you're looking for government-backed safety in your investments, but they are still subject to interest rate movements—review duration and interest rate trends before investing.

Last updated: 16 Jun 2025

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