Fund Analyst's Choice: Four short-duration funds handpicked by our analysts

With relatively stable returns, short-duration funds are among the most attractive fixed-income options in the market currently. Further, their reduced volatility makes them an ideal choice for your core debt portfolio. If you are thinking of investing for the short term but are unsure of which fund to choose, here's a list of four short-duration funds chosen by our analysts. Axis Short Term Fund This fund has rewarded its investors with consistent returns. In 2023, it returned 7.46 per cent, compared to the category median's 7.31 per cent. This momentum continued in 2024, with the fund outperforming its peers. Reasons for outperformance The good show is mainly due to the fund's ongoing strategy of higher exposure to longer-duration bonds. The fund is now hitting its maximum portfolio-level duration, as Devang Shah, Head - Fixed Income, believes that "we are nearing the peak of interest rate/inflation cycle". While the fund focuses on bonds maturing between 2-4 years, there's bias towards those with maturity over seven years, mostly driven by g-secs. Shah believes that with the inclusion of Indian government bonds in the JP Morgan Government Bond Index - Emerging Markets (GBI-EM), g-secs will benefit from growing FPI (foreign portfolio investor) buying, thus, improving the returns. Further, the fund manager made strategic shifts on the credit side, seeing an opportunity in the 3-5-year corporate bond segment. Our take Active m