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In the arbitrage fund category, Ladha suggests investors to opt for Tata Arbitrage Fund. The fund has “done really well, and… they have a sizable AUM of Rs 6,000 crore plus stable fund. So, that fund is very good especially because it has low tracking error”.
For a short-term horizon, Ladha also favour floating rate funds, “where presently YTM are somewhere between 7.25% and 7.75% modified duration, which is roughly around the 0.50 to 0.70 range.” Investors can pick products in this category from ICICI Prudential, HDFC and Kotak, among which “YTMs more or less are the same”, Ladha said.
While all mutual fund companies offer liquid or ultra-short-term products in their debt category, investors should pick the ones with higher ratings, advised Rungta. “You have to choose the funds that have a good track record and good papers in hand because we have seen in the past how things went wrong in a good fund house.”
While selecting debt funds, Ladha suggests first looking at safety in terms of the track record of the house. The second factor to look at is liquidity, and lastly, returns, Ladha said.
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