Low returns from debt funds? Know how to manage this risk!
Low returns from debt funds? Know how to manage this risk!
After Silicon Valley Bank revealed large losses on its US bond portfolio that had eaten into its capital, thereโs been a lot of social media outrage. Some folks are shocked that banks can make losses on a cast-iron investment such as US treasuries. Others seem to be appalled that Silicon Valley Bank is not alone and that many other global banks are in the same boat. This shows that investors at large have only a vague understanding of what rising interest rates do to bond portfolios.
You have also been bombarding us with questions on how interest rate risks can play out for debt funds, particularly target maturity, constant maturity and gilt funds. We try to address them here.