InvestmentFinancial Glossary
Gilt Fund
Definition
A debt mutual fund that invests exclusively in government securities (G-Secs) across various maturities. Since government bonds carry zero credit risk (the government can always print money to honour its debt), gilt funds' primary risk is interest rate risk, which depends on the fund's duration.
Why It Matters
Gilt funds are ideal during falling interest rate environments — as rates drop, bond prices rise, generating capital gains. In 2023-24, long-duration gilt funds delivered 8-10% returns as rate cut expectations built up. However, they can lose 3-5% in a single quarter during rate hikes. Timing matters significantly for gilt fund returns.