Low Duration Funds
Last Updated on 12 May 2026
3 Year Average Returns
6.92%
Funds on Anand Rathi
131
Low Duration Funds to Invest in 2026
| Fund Name | |||
|---|---|---|---|
| UTI-Low Duration Fund - Regular (IDCW-D) | 8.83% | 11.35% | 9.74% |
| Tata Treasury Advantage Fund (IDCW-W) | 5.91% | 10.10% | 7.82% |
| UTI-Low Duration Fund - Regular (IDCW-H) | 6.29% | 7.19% | 7.26% |
| UTI-Low Duration Fund - Regular (Flexi) | 6.29% | 7.19% | 7.26% |
| UTI-Low Duration Fund - Regular (IDCW-W) | 6.29% | 7.19% | 7.26% |
| UTI-Low Duration Fund - Regular (G) | 6.29% | 7.18% | 7.26% |
| UTI-Low Duration Fund - Regular (Bonus) | 6.29% | 7.18% | 7.26% |
| UTI-Low Duration Fund - Regular (IDCW-M) | 6.29% | 7.18% | 7.26% |
| UTI-Low Duration Fund (IDCW-Q) | 6.29% | 7.44% | 7.22% |
| UTI-Low Duration Fund - Regular (IDCW-F) | 5.49% | 6.71% | 6.97% |
| UTI-Low Duration Fund (G) | 6.29% | 6.95% | 6.93% |
| UTI-Low Duration Fund (IDCW-A) | 6.29% | 6.95% | 6.93% |
| UTI-Low Duration Fund (Bonus) | 6.29% | 6.95% | 6.93% |
| UTI-Low Duration Fund - Regular (IDCW-Q) | 5.77% | 6.53% | 6.87% |
| ICICI Pru Savings Fund - Regular (IDCW-W) | 6.50% | 8.03% | 6.85% |
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What Are Low Duration Fund?
A Low duration fund is a subtype of open-ended debt fund investing primarily in debt and money market instruments with a short maturity, usually between 6 months and 12 months.
They mainly invest in short-term instruments like corporate bonds, commercial papers, certificates of deposit, and government securities that mature quickly. Because of this shorter maturity, the impact of interest rate changes is also limited.
For many investors, low duration fund becomes a "temporary parking" option when they are waiting to deploy money elsewhere, or when they want stability with some returns.
Top Features Of Low Duration Fund?
The main features of low duration mutual funds are as follows:
Lower interest rate risk
Low duration funds have a short maturity period, so interest rate changes don't impact them broadly (unlike other debt funds). This makes them stable compared to long-duration debt funds.
Liquidity
Many low-duration mutual funds allow quick redemptions, with funds typically credited within 1–2 working days. Helpful when you might need access to funds on short notice.
Professionally managed
The fund manager actively chooses debt instruments based on credit quality, maturity, and market conditions. You don't need to track interest rate movements or bond markets yourself.
Flexible investment options
You can invest in low duration funds through a lump sum or SIP investment, depending on how and when you want to deploy your money.
How Does Low Duration Fund Work?
Like any debt fund, the low duration fund pools money from investors and further invests in the respective instruments. Here's how these short duration fund work!
Money pooling structure
A low duration fund pools money from multiple investors and invests it collectively in short-term debt and money market instruments.
Investment universe
These funds invest in instruments like corporate bonds, commercial papers, certificates of deposit, treasury bills, and other short-term debt securities.
SEBI-prescribed duration
As per SEBI guidelines, low duration debt funds must maintain a portfolio with a Macaulay duration of 6 to 12 months.
Active fund management
The portfolio is actively managed by fund managers who decide instrument selection, maturity profile, and reinvestment based on interest rate outlook and credit quality.
Return generation
Returns are primarily generated through interest income from debt securities, along with limited capital gains from portfolio adjustments.
Risk control approach
The main reason for including short maturity instruments is to limit interest rate risk. Likewise, credit exposure is managed through diversification and issuer evaluation.
Who Should Invest In Low Duration Fund?
While low duration fund are short-term focused, here's who can consider investing in these funds.
- Suitable for investors with a short-term horizon of 6 months to 1 year who want better returns than a savings account.
- Ideal for conservative or risk-averse investors seeking lower risk with relatively better post-tax returns than other options.
- Often used as a temporary parking option for surplus money.
How To Invest In Low Duration Fund With Anand Rathi?
Planning to invest in a low duration mutual fund online? With Anand Rathi, you can invest through a secure, online, and easy-to-use platform. Here's how to get started in 4 easy steps:
Sign Up or Log In
Visit the Anand Rathi website or download the AR Invest app – sign up and log in securely to your demat account account.
Explore Low Duration Funds
Compare low duration funds based on portfolio quality, maturity profile, ratings, and risk level.
Choose and Invest
Select your preferred fund and invest via SIP or lumpsum investment.
Track Your Investment
Monitor NAV, view portfolio composition, and track investments —all in one place from a single dashboard.
Factors To Consider Before Investing In Low Duration Fund
Before investing in a low duration fund, it's important to look beyond just returns.
Credit Quality
Since the fund invests in debt instruments, credit ratings matter importantly. Check the portfolio holdings to have a better idea of the credit quality of the fund.
Expense Ratio
A higher expense ratio eats into your returns, especially in debt funds where margins are already limited.
Fund Manager's Strategy and Philosophy
Some managers take slightly higher credit exposure to boost returns, while others focus purely on safety. Evaluate how and where the fund manager's philosophy lies.
Investment Horizon
Low duration funds come with a standard maturity of 6 to 12 months. Ensure the fund's average maturity aligns with your financial goal and investment timeline. If it's more than a year, short-duration or other debt funds can be explored.
Taxation Rules On Low Duration Fund
Any person (or investor) who has invested or will invest in low duration funds falls into two categories:
Invested "Before April 1, 2023," but sold after July 23, 2024: LTCG (12.5% - without indexation), STCG (slab rate).
Invested "On or after April 1, 2023": Irrespective of holding period - Taxed at the individual's slab rate under STCG rules.
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