Top Corporate Bond Mutual Funds for Investment in March 2025
Investors seeking moderately safe debt schemes to accomplish short-term financial objectives or those seeking secure investment plans for three years or more may opt for corporate bond funds in March 2025. The funds invest at least 80% of the assets in high-rated corporate securities and thus form a safer investment plan than other debt schemes like credit risk funds. They are also deemed safer than gilt and long-term debt funds, which are very responsive to changes in interest rates. Factors to Consider Before Investing
Two important factors to consider prior to investing in corporate bond funds are safety and movements in interest rates. Safety assumed prominence after there were a string of defaults and downgrades affecting the debt market almost three years ago. Six debt schemes by a well-regarded mutual fund house closing shop at the time hit conservative investors hard. Even though market conditions have since normalized, caution still needs to be exercised while choosing debt schemes.
Interest rate changes are another key factor to consider. Central banks across the globe are taking a conservative stance because of ongoing inflation worries, and caution has been sounded that rate cuts could be slow in coming. In India, the Reserve Bank of India (RBI) has been keeping interest rates constant, with no specific signal of an imminent cut.
Understanding the Risks
Though corporate bond funds mostly invest in AAA-rated securities, they are not completely risk-free. Though the top credit rating provides a higher level of security, it is essential to examine whether fund managers are exposing investors to higher risks in the name of higher returns. Investors need to scrutinize the portfolio of such schemes carefully and make sure that their investment suits their risk profile.
Recommended Corporate Bond Funds for March 2025
The below corporate bond funds are recommended for investment, with no change in the recommendation list this month:
- HDFC Corporate Bond Fund
- Aditya Birla Sun Life Corporate Bond Fund
- ICICI Prudential Corporate Bond Fund
- Sundaram Corporate Bond Fund
Investors who already possess these funds may proceed with investments without any worries. Monthly performance tracking of investments is recommended.
Selection Methodology
The debt mutual fund schemes were shortlisted considering the following parameters:
1. Mean Rolling Returns: Daily computed over the past three years to determine performance consistency.
2. Three-Year Consistency: Quantified with the Hurst Exponent (H), which assesses the fund’s net asset value (NAV) series predictability.
- If H = 0.5, the returns are geometric Brownian motion-like, and predictions are challenging.
- If H < 0.5, the returns are mean-reverting.
- When H > 0.5, the returns exhibit persistence, which reflects a strong trend through time. A higher value of H reflects lower volatility.
3. Downside Risk Assessment: Only negative returns are used in this measure, computed by taking the square root of the sum of squared negative returns per number of observation days.
4. Outperformance Measure: Calculated by comparing the returns of the fund with the returns of the benchmark on a rolling return basis. The difference between the two measures the active return of the fund.
Also, only debt funds with a size of Rs.50 crore or more were considered for analysis.
Conclusion
Corporate bond funds still provide a comparatively secure investment vehicle for investors in search of stability in the debt market. As these funds give investors high-rated securities for the preservation of capital, investors need to be careful about interest rate movements and risk factors. Corporate bond funds can be an appropriate choice for fulfilling financial goals with a balance between safety and return, provided with a well-chosen portfolio.
