Insane expense ratio of gilt funds?

Why are gilt funds with practically zero active management asking for 0.5% while liquid/overnight funds with very active management (higher effort from asset managers) only 0.2%. Am I missing something? (Is it because of lower aum?)

There are lots of newer index funds which have been launched with very low expense ratios.

Debt: Target Maturity - Fund Selector - snapshot | Value Research (valueresearchonline.com)

Asking about gilt funds (long dated gov bonds)

I think even the longer duration gilts are bought and sold regularly, so there is some activity from management’s side, so the expense ratio.

Liquid, MM, UST, for the most part of accrual funds, so there is not much to do, if highly rated papers are purchased.

I don’t know the ERs of gilt or the aforementioned debt funds, saying from what you have mentioned.

I’ve tracked them. They are rarely changed.

They need active management (all bills, papers need to be repurchased regularly)

Maybe those gilts also have a cash component, for investors’ redemption purposes, which is managed, so they charge.

BTW, have you checked if gilt funds’ ER has increased, or been the same since their inception?

That should apply for liquid/ overnight funds too

I’m not sure where you can get historical er data but it hasn’t changed for over 2years, last i checked

That is what they do in such debt funds. I am just saying that there must be an active element of management with gilt funds too, like with other debt funds.

SIDs of the funds, may be fact sheets.

Also if the ER is same across all the fund houses, then I guess it is normal.

Not sure the name of the above fund, but made me check on some of the gilt funds and their expense ratio. This is really unreasonable - Are they charging because retail can get to invest in these gilts? Not sure. Would be nice to know which fund has 0.5 as charge.

Kotak Gilt - 1.49%
SBI Magnum gilt - 0.93%
ICICI Prudential Gilt Fund - 1.14%
Nippon India Gilt Securities Fund - 1.57%
Aditya Birla Sun Life Government Securities Fund Direct - 0.29%

SBI magnum gilt : 0.45%
HDFC Gilt: 0.47%
ICICI Prudential Gilt : 0.57%

This data is from coin, zerodha

Money control says it is 1.14. Anyways the bigger picture is this charge is on a every year basis. Bank FDs are much better I guess as there is no charge but taxable.

Cannot be pledged for trading (on zerodha or most other large brokers)

Yes - check the link. It has both long and short dated Gilt index funds.

@Suyash.K yes, got a better look. The expense ratio is low (0.16%) but the government bonds purchased under these gilts are of the lowest yield (around 5.5%). Considering this, the gilts with higher expense ratio are better.

Nope, Even overnight rate is more than that now.

https://www.moneycontrol.com/mutual-funds/nav/idfc-gilt-2028-index-fund-direct-plan-growth/MAG2126
IDFC gilt index yields are above 7.

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Hoping that the bigger banks also follow idfc and set more reasonable expense ratios.

they might if they see they start losing market share to idfc. otherwise this will go on and on and on.

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Mostly short term funds are rotating the money. But long term funds need to forecast (analyse) the future interest rate. That’s required high expenses.

That’s of no consequence. Their analysis is not actionable.

You can also check GSEC ETFs. Expense ratios normally under 0.20%. Also provide high margin.

ICICI5GSEC - ICICI Prudential Nifty 5 Yr Benchmark G-SEC ETF
ICICI10GS - ICICI Prudential Nifty 10 yr Benchmark G-Sec ETF