Gilt-edged funds are mutual funds that invest solely in government securities like bonds and treasury bills. They are considered a conservative investment suitable for risk-averse investors as they have little credit risk and high liquidity. However, their prices are highly sensitive to interest rate fluctuations. Major players in India include SBI Magnum Gilt fund, HDFC Gilt fund, and ICICI Prudential Long Term Gilt fund. These funds differ in their maturity profiles and can provide reasonable returns with a high degree of safety for those seeking low-risk investments.

1. GILT-EDGED FUNDS
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Presented by:

2. MUTUAL FUNDS:
An investment vehicle that is made up of a
pool of funds collected from many
investors for the purpose of investing in
securities.
A mutual fund's portfolio is structured and
maintained to match the investment
objectives.

3. MUTUAL FUNDS MECHANISM:

4. GILT-EDGED FUNDS:
 Gilts originated in Britain.
 Gilt-edged Funds are mutual funds that
invest only in government securities.
 They are preferred by risk averse and
conservative investors who wish to invest in
the shadow of secure government bonds.

5.  These funds invest in Gilt-edged securities: state and
central government Bonds, T-bills.
 Have different maturity profiles-short term medium
term or long term.
 Gilt funds differ from bond funds because bond funds
invest in corporate bonds, government securities, and
money market instruments.
 Gilt funds stick to high quality-low risk debt, mainly
government securities.

6. RISKS INVOLVED ?
 Major risks in any debt instrument investment:
 Credit risk
 Liquidity risk
 Interest rate risk
 As gilt funds invest only in G-sec Credit risk is near
to zero.
 Gilts are highly liquid in nature and Gilt funds being
the mutual fund are liquid. Hence low liquidity risk.
 The biggest risk involved in Gilt funds is Interest
Rate Risk

7. INTEREST RATE RISK:
 Here “ Price of the bond and interest rates are
inversely related”.
 When interest rate rises , bond prices fall or vice
versa.
 Bonds prices and gilt fund unit prices tend to fall in
rising interest rate scenario.
 Fall in interest rates leads to rise in bond prices.

8. WHO SHOULD INVEST IN GILT FUNDS?
 These are ideal for those who want safety for their
investments or are risk-averse and, at the same
time, are looking for reasonable returns on their
money.
 When should you invest in gilt edged funds?
 These are a good option when the RBI is not likely
to raise interest rates immediately.
 situation when interest rates have peaked and a
downturn seems imminent, would be an
opportunity time to invest in gilt funds.

9. ADVANTAGES OF GILT FUNDS:
• Less credit risk: as they are government
securities.
• Tax benefits
• Open to retail investors: through these funds if not
only large institutional investors invest in G-sec
market.
• Diversification of portfolio
• Guaranteed returns- safe investments

10. DISADVANTAGES OF GILT FUNDS:
 Interest rate risk
 Not frequently traded
 Mostly ideal for short-term investment

11. GILT-EDGED SWITCHING:
 Gilt-edge switching involves selling of one
bond at a discount in order to purchase a
more favorably yielding instrument.
 Higher yeild bonds may increase the
potential for profits.

12. GILT FUNDS IN INDIA:
 The first gilt fund in India was setup in December
1998. The Reserve Bank of India is the governing
body of all gilt funds ever since.
 The RBI provides various facilities to encourage
gilt funds and to create a broader Investor base
for government securities:
 Liquidity support
 SGL and current accounts
 Funds transfer facility
 Access to call market
 Ready forward transactions

13. MAJOR PLAYERS:
 SBI Magnum Gilt - LTP
 HDFC Gilt Fund- LTP
 ICICI Pru Long Term Gilt
 JPMorgan India G-Sec. Fund -RP
 Reliance Gilt Sec. - RP
 Kotak Gilt Invt - Regular
 Birla Sun Life GSec - LTF

14. EXAMPLE:
 SBI Magnum Gilt - LTP

15. SBI MAGNUM GILT - LTP (G)
 Overview:
 Very Good performer in the category
 The scheme is ranked one in Gilt long term category by CRISIL
(for quarter ended Mar 2015) rank unchanged from last quarter.
 Investment Objective: To provide the investors with returns
generated through investments in government securities issued by the
Central Government and / or a State Government.
 Scheme details :
 Fund Type- Open-Ended
 Investment Plan- Growth
 Launch date- Jan 01, 2001
 Asset Size- Rs 422.63 crores (Avg. for qtr Jan-Mar 2015)
 Minimum Investment- Rs.5000
 Fund Manager- Dinesh Ahuja

16. ASSET ALLOCATION OF SBI GILT-
MAGNUM FUND:(AS OF 06/30/2015)
 Cash - 2.40%
 Stock - 0.00%
 Bond –97.60%
 Others - 0.00%
Investment
Cash
Stock
Bond
Others

17. CONCLUSION:
Investing in gilt funds though offer safe
investment option to derive maximum satisfaction
from investment factors like: timing, risk taking
ability, fund’s track record and other factors have
to be considered before investment.

18. REFERENCES:
 www.moneycontrol.com
 www.amfiindia.com
 www.rbi.gov.org
 Financial Services-Text by Shashi. K. Gupta

19. THANK YOU!