Best Quant Debt Mutual Funds

Quant Mutual Fund was set up in April 1996. As of 2021, the AMC has an Asset Under Management of Rs.24,65,338.68 crore and an average quarterly AUM of Rs.721.48 crore. Moreover, it has a market percentage of 0.01% in the Indian mutual fund sector, with close to 15 schemes in total. 

The fund options under this AMC mostly comprise small-cap equity, short-term liquid, and multi-asset hybrid funds, constituting the best quant debt mutual funds. 

SEBI defines debt mutual funds as those investing primarily in debt instruments. For example, debt instruments can be commercial papers, certificates of deposits, debentures, government securities, treasury bills, etc. Issuers of debt instruments raise money against these securities from the bond market. They later pay back the principal along with specified interest. 

However, there may arise a case where the issuer is unable to pay back the principal. The risk associated with this phenomenon is known as credit risk. Hence, before investing in the top quant debt mutual funds, one may want to study the credit rating of underlying bonds which different rating agencies accredit. 

However, debt instruments are safer and less volatile than equity instruments. Hence, the upsides of debt mutual funds are capital preservation and income generation. Moreover, there are plenty of subtypes of debt mutual funds. Therefore, the classification is done on the tenure of securities, type of issuer, and fund management strategy. 

Based on tenure, there are short-term debt mutual funds. They comprise liquid, overnight and ultra-short duration funds with a maturity period of fewer than 6 months. Further, medium debt mutual funds comprise securities with a Macaulay duration between 3 and 4 years. Finally, long term debt MFs feature debt instruments with a Macaulay duration of more than 7 years, respectively. 

At present, there are near about 5 options in the debt mutual fund category under the supervision of this AMC. 

Some of the best quant debt mutual funds in 2023 in the short-term category have limited exposure to interest rate risk. They also provide better returns than savings accounts or fixed deposits. 

Individuals can earn from debt mutual funds in two ways – capital gains and interest earnings. The former is offered if an investor opts for the dividend payout option. One earns capital gains when they sell the units of a scheme. 

Taxability

Based on the duration of holding, these gains may be classified as short-term capital gains or long-term capital gains. If the debt mutual fund units were held for 3 years or less before the sale, they are considered short-term capital gains. If the units were held for more than 3 years, they are classified as long-term capital gains. 

Short-term Capital Gains Tax: The IT Department taxes short-term capital gains by adding them to the annual income of an investor before calculating tax per applicable bracket. 

Long-term Capital Gains Tax: LTCG is taxed at 20% with indexation benefits. 

Factors to Consider Before Investing

Apart from the taxation, there are other factors to consider before investing in the best quant debt mutual funds. These are the expense ratio, risk appetite, duration, etc. 

Expense ratio: Managing a fund incurs plenty of expenses. The fund managers and brokers have to be paid. Moreover, other overheads need to be cleared. Such management fees are levied on investors in the form of expense ratios. The expense ratio should be deducted from the return rate before calculating returns. 

Risk appetite: Every investor should be aware of the risks associated with any investment. Beyond that, however, an investor should know their risk appetite, which denotes the level of losses they can digest should a fund underperform. Therefore, the best quant debt mutual funds have lower associated risk than equity shares. 

Present interest rate: Before investing in debt mutual funds, investors should also consider the current interest rate regime. Typically, there is an inverse link between debt mutual funds and market interest rates. When interest rates go up, the value of pre-issued bonds decrease. Moreover, when interest rates fall, the value of such bonds go up. These fluctuations influence a scheme’s NAV. Therefore, investors may study the present interest rates and the probability of them going up before investing.

Exit load: AMCs charge an exit load as a penalty if an investor prematurely exits a scheme. The exit load is levied to discourage investors from withdrawing from funds. However, liquid mutual funds come with no exit load because of their low maturity period. Therefore, before investing in any of the best quant debt mutual funds, investors should know the exit load. 

Size of AUM: AUM size determines how thinly or thickly the fund expenses will be spread across investors. Usually, a scheme with a significant AUM will involve a lower expense ratio. 

In conclusion, investment in the best quant debt mutual funds 2022 is a risky matter. Thus, one may want to undertake all investments after considerable thought and prudence.