Medium To Long Duration Funds: Complete Overview

Do you want to gain knowledge about medium to long-duration funds? Maybe, you are here for the same. These funds offer a unique way to invest your money, aiming to strike a balance between risk and reward.

Well! This article presents an overview of medium to long-duration funds, examples, their risks & returns etc. Keep reading!

What Are Medium To Long Duration Funds?

A medium to long-duration fund refers to debt mutual funds that invest in debt securities and money market instruments, aiming to maintain a Macaulay Duration between 4 and 7 years.

What Is Macaulay Duration? Macaulay duration is a measure of the weighted average time until the bond’s cash flows are received.

How Do These Funds Work? The fund manager creates a portfolio of credible debt securities and adjusts them to achieve an average maturity within the four to seven-year range.

Objective- The objective of these funds is to offer conservative investors an investment opportunity, particularly when their investment horizon falls between 4 to 7 years.

[ Related Read- Other Types of Debt Funds ]

Examples Of Medium To Long Duration Funds

Here are some examples of medium to long-duration funds. It is to be noted that the list does not provide any investment advice & investors must analyse each scheme themselves.

Fund Name3-Year CAGR5-Year CAGR
UTI Bond Fund8.92%5.64%
SBI Magnum Income Fund5.65%8.16%
ICICI Prudential Bond Fund5.16%7.79%
Kotak Bond Fund5.13%7.97%
Aditya BSL Income Fund5.05%8.02%
Last Updated: August 2023

Risks And Returns

Risks – As a subcategory of debt mutual funds, medium to long-duration funds involve interest rate risk, credit risk and liquidity risk.

  1. Interest Rate Risk- Fluctuations in interest rates impact the fund’s performance.
  2. Credit Risk- The likelihood of default by an issuer of debt securities.
  3. Liquidity Risk– Difficulty in turning assets into cash quickly.

Returns – The returns of these funds may fluctuate based on specific market conditions and how well a fund is being managed. Generally, these funds generate average annual returns between 5% to 9%.

Factors To Consider

Investors should consider the following factors before investing in a debt mutual fund. It may help them save unnecessary spending and earn additional returns.

A. Composition Of Fund’s Portfolio – Analysing the fund’s portfolio may help you calculate the involved risk. If the fund invests in highly rated securities, it carries less risk & vice-versa.

B. Past History Of Fund – It is also important to check the past performance of the fund, the fund manager’s track record and how well is the fund being managed.

C. Expense Ratio & Additional Charges – Considering the compounding effect, a higher expense ratio can significantly erode your overall returns. Also, be aware of additional charges.

Related Read- How to choose the best mutual fund


  1. How Are medium to long duration Funds Taxed?

    As per recent changes in taxation rules for debt mutual funds, these funds are now subject to taxation according to the applicable Income Tax slab rate.

  2. Can I Do SIPs in medium to long-duration funds?

    Yes, investors can choose to systematically invest in these funds using the SIP investment mode.

  3. Can I withdraw Money From These Funds Anytime?

    Yes, you can sell the units anytime to withdraw money. However, an exit load will be charged if you sell the units before a specified duration.

A commerce graduate turned a digital creator to follow his passion for writing and sharing useful & well-researched information that adds some value to people's lives.

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