Constant Maturity Fund: 5 things to know

1.A constant maturity fund is a long-term debt fund that aims to maintain the maturity constant at all times, say for 10 years.
2.The maturity is maintained by investing in government bonds of different maturities, so that the portfolio maturity is 10 years.
3.Irrespective of when the investment is Done, the maturity of the portfolio will be the same.
4.This type of fund has huge interest rate risk as any change in the interest rate will impact the price of the bonds, which will impact fund returns.
5.The price of a bond is inversely related to the interest rate. Price rises when rates fall and prices drop when rates rise.


Category:Content on this page is courtesy Centre for Investment Education and Learning (CIEL).
Contributions by Girija Gadre, Arti Bhargava and Labdhi Mehta.