Table of Contents
Ultra Short Term Bond Funds
Ultra short term funds, earlier referred as Liquid Plus Funds, are funds that invest in debt instruments having residual maturities of more than 91 days and typically less than 1 year(in some cases they may go upto 1.5 years). Ultra Short Term Funds are short term investments that are highly suitable for investors who are willing to marginally increase the risk of investment to earn good returns. Essentially, Ultra short Funds invest in money market securities and other debt instruments of short maturities, however, the average Portfolio maturity of these funds is generally little higher than that of Liquid Funds.
Also known as Cash or Treasury Management Funds, Ultra Short Term Funds generally offer good returns that other types of Debt fund (like Liquid Mutual Funds).
Ultra Short Term Bond Funds Features
Fund Type
Ultra-Short Term Funds are open-ended and the maturity period of funds varies from fund to fund. The maturity is very short(usually a couple of months) but longer than that of liquid funds. The investors can easily buy and sell the units of these funds as per the NAV (Net Asset Value) of the Redemption day.
NAV of Ultra Short Term Funds
For Ultra Short Term Funds, the purchase happens on a (T+0) Basis. This means that the NAV is fixed on the same day as the funds reach the AMC. For e.g. for an investor purchasing the fund within the cut-off time on a Tuesday (and funds being realised), the NAV date applicable would be Tuesday itself.
Exit Load of Ultra Short Term Bond Funds
Some Ultra Short Term Funds may have exit loads on exits made within very short periods of time (ranging from 7 days to 1 month). The period till which exit load applies may vary with funds. However, some ultra short terms funds do not have any exit loads also.
Returns of Ultra Short Term Funds
The returns may be paid to the investors in the form of Dividends (in the case of Dividend Funds) or in terms of appreciation of the fund NAV (in the case of Growth funds).
Redemption Ultra Short Term Funds
In the case of redemption, the process is the same for both liquid funds and Ultra Short Term Funds. For all redemption requests received by the AMC within the cut-off time (3 PM), the proceeds are paid to the customer the next day i.e. on a (T+1) basis. Albeit, if the request gets registered after 3 PM, the investors shall receive the redemption amount day after.
Minimum Amount of Investment
The minimum of Investing in Ultra Short Term Funds is INR 5,000 to 10,000 (on the retail plans).
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Investment Avenues of Ultra Short Mutual Funds
Ultra Short Term Funds are fixed Income investments that invest in money Market instruments like Treasury Bills but these may be 91-Day, 182-Day or 360-Day Treasury Bills. They can also invest in CDs and CPs having residual maturities longer than 91 days. Moreover, it is sometimes understood that there is no credit risk in such portfolios. However, this is not the case. Any short term investment like Ultra Short Funds can give a negative return as well if there is a Default. But, most companies delay payments on longer-dated Bonds before they start defaulting on short term debt (since this would lead a freeze in short term credit). Also, the investors need to carefully look at the portfolio in these funds to assess the quality of instruments and be ready to take that risk.
Why Invest in Best Ultra Short Term Funds?
Typically, the yield on a debt instrument is higher for instruments with longer maturities. Think of it as a way to reward the extra risk that investors take to be invested in the instruments for a longer period of time. In finance, this is called the liquidity premium Theory. Thus, securities in Ultra Short Mutual Funds usually earn a higher yield as compared to Liquid funds (albeit at a relatively higher risk). As a result, Ultra Short Term Funds may give marginally better returns than Liquid funds over comparable periods of time. So, make a sensible short-term investment in Mutual Funds by investing in Best Ultra Short term Mutual Funds to earn good returns with less Volatility.
Taxation of Ultra Short Term Funds
In the below table, the returns of Ultra Short Bond Funds received in the form of a dividend are tax-free in the hands of investors.
However, a Dividend Distribution Tax (DDT) is deducted at the source by fund houses, which is 25% in case of Debt Funds like Ultra Short Term Funds.
| Liquid Funds | Liquid Funds | Ultra Short Funds | Ultra Short Funds | |
|---|---|---|---|---|
| Class of Investors | Individuals/HUF | Corporate | Individuals/HUF | Corporate |
| Dividend Distribution Tax | 27.038% | 32.445% | 13. 519% | 32.445% |
| Short Term Capital Gains | As per income tax Slab Rates | As per Income Tax Slab Rates | As per Income Tax Slab Rates | As per Income Tax Slab Rates |
(Please note, investors are advised to consult their Tax consultant before taking any decisions)
Best Performing Ultra Short Debt Funds to Invest FY 24 - 25
Below is the list of top funds have net assets over 100 Crore and managing assets for atleast 3 years.
Fund NAV Net Assets (Cr) 1 MO (%) 3 MO (%) 6 MO (%) 1 YR (%) 3 YR (%) 5 YR (%) Franklin India Ultra Short Bond Fund - Super Institutional Plan Growth ₹34.9131
↑ 0.04 ₹297 0.6 1.3 5.9 13.7 8.8 8.7 Aditya Birla Sun Life Savings Fund Growth ₹526.161
↑ 0.14 ₹15,890 0.6 2 3.8 7.8 6.6 6.1 ICICI Prudential Ultra Short Term Fund Growth ₹26.6237
↑ 0.00 ₹13,935 0.5 1.8 3.5 7.5 6.3 5.9 Note: Returns up to 1 year are on absolute basis & more than 1 year are on CAGR basis. as on 7 Aug 22
To provide a combination of regular income and high liquidity by investing primarily in a mix of short term debt and money market instruments. Franklin India Ultra Short Bond Fund - Super Institutional Plan is a Debt - Ultrashort Bond fund was launched on 18 Dec 07. It is a fund with Moderate risk and has given a Below is the key information for Franklin India Ultra Short Bond Fund - Super Institutional Plan Returns up to 1 year are on The primary objective of the schemes is to generate regular income through investments in debt and money market instruments. Income maybe generated through the receipt of coupon payments or the purchase and sale of securities in the underlying portfolio. The schemes will under normal market conditions, invest its net assets in fixed income securities, money market instruments, cash and cash equivalents. Aditya Birla Sun Life Savings Fund is a Debt - Ultrashort Bond fund was launched on 16 Apr 03. It is a fund with Moderately Low risk and has given a Below is the key information for Aditya Birla Sun Life Savings Fund Returns up to 1 year are on (Erstwhile ICICI Prudential Regular Income Fund) The fund’s objective is to generate regular income through investments primarily in debt and money market instruments. As a secondary objective, the Scheme also seeks to generate long term capital appreciation from the portion of equity investments under the Scheme. ICICI Prudential Ultra Short Term Fund is a Debt - Ultrashort Bond fund was launched on 3 May 11. It is a fund with Moderate risk and has given a Below is the key information for ICICI Prudential Ultra Short Term Fund Returns up to 1 year are on 1. Franklin India Ultra Short Bond Fund - Super Institutional Plan
CAGR/Annualized return of 8.9% since its launch. . Franklin India Ultra Short Bond Fund - Super Institutional Plan
Growth Launch Date 18 Dec 07 NAV (07 Aug 22) ₹34.9131 ↑ 0.04 (0.11 %) Net Assets (Cr) ₹297 on 31 Jul 22 Category Debt - Ultrashort Bond AMC Franklin Templeton Asst Mgmt(IND)Pvt Ltd Rating ☆ Risk Moderate Expense Ratio 0.52 Sharpe Ratio 2.57 Information Ratio 0 Alpha Ratio 0 Min Investment 10,000 Min SIP Investment 500 Exit Load NIL Yield to Maturity 0% Effective Maturity 1 Year 15 Days Modified Duration Growth of 10,000 investment over the years.
Date Value 30 Nov 19 ₹10,000 30 Nov 20 ₹10,422 30 Nov 21 ₹11,635
Purchase not allowed Returns for Franklin India Ultra Short Bond Fund - Super Institutional Plan
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 7 Aug 22 Duration Returns 1 Month 0.6% 3 Month 1.3% 6 Month 5.9% 1 Year 13.7% 3 Year 8.8% 5 Year 8.7% 10 Year 15 Year Since launch 8.9% Historical performance (Yearly) on absolute basis
Year Returns 2023 2022 2021 2020 2019 2018 2017 2016 2015 2014 Fund Manager information for Franklin India Ultra Short Bond Fund - Super Institutional Plan
Name Since Tenure Data below for Franklin India Ultra Short Bond Fund - Super Institutional Plan as on 31 Jul 22
Asset Allocation
Asset Class Value Debt Sector Allocation
Sector Value Credit Quality
Rating Value Top Securities Holdings / Portfolio
Name Holding Value Quantity 2. Aditya Birla Sun Life Savings Fund
CAGR/Annualized return of 7.4% since its launch. Ranked 6 in Ultrashort Bond category. Return for 2023 was 7.2% , 2022 was 4.8% and 2021 was 3.9% . Aditya Birla Sun Life Savings Fund
Growth Launch Date 16 Apr 03 NAV (20 Dec 24) ₹526.161 ↑ 0.14 (0.03 %) Net Assets (Cr) ₹15,890 on 15 Dec 24 Category Debt - Ultrashort Bond AMC Birla Sun Life Asset Management Co Ltd Rating ☆☆☆☆☆ Risk Moderately Low Expense Ratio 0.54 Sharpe Ratio 3.32 Information Ratio 0 Alpha Ratio 0 Min Investment 1,000 Min SIP Investment 1,000 Exit Load NIL Yield to Maturity 7.61% Effective Maturity 7 Months 17 Days Modified Duration 5 Months 8 Days Growth of 10,000 investment over the years.
Date Value 30 Nov 19 ₹10,000 30 Nov 20 ₹10,719 30 Nov 21 ₹11,139 30 Nov 22 ₹11,639 30 Nov 23 ₹12,472 30 Nov 24 ₹13,436 Returns for Aditya Birla Sun Life Savings Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 7 Aug 22 Duration Returns 1 Month 0.6% 3 Month 2% 6 Month 3.8% 1 Year 7.8% 3 Year 6.6% 5 Year 6.1% 10 Year 15 Year Since launch 7.4% Historical performance (Yearly) on absolute basis
Year Returns 2023 7.2% 2022 4.8% 2021 3.9% 2020 7% 2019 8.5% 2018 7.6% 2017 7.2% 2016 9.2% 2015 8.9% 2014 9.7% Fund Manager information for Aditya Birla Sun Life Savings Fund
Name Since Tenure Sunaina Cunha 20 Jun 14 10.46 Yr. Kaustubh Gupta 15 Jul 11 13.39 Yr. Monika Gandhi 22 Mar 21 3.7 Yr. Data below for Aditya Birla Sun Life Savings Fund as on 15 Dec 24
Asset Allocation
Asset Class Value Cash 44.4% Debt 55.34% Other 0.25% Debt Sector Allocation
Sector Value Corporate 53.84% Cash Equivalent 39.09% Government 6.82% Credit Quality
Rating Value AA 35.54% AAA 64.46% Top Securities Holdings / Portfolio
Name Holding Value Quantity National Housing Bank 7.83%
Debentures | -5% ₹821 Cr 82,000 Aditya BSL Liquid Dir Gr
Investment Fund | -5% ₹751 Cr 18,413,893
↑ 18,413,893 Shriram Finance Company Limited
Debentures | -4% ₹602 Cr 60,000 Nirma Limited
Debentures | -3% ₹487 Cr 48,500
↓ -1,500 National Housing Bank
Debentures | -3% ₹400 Cr 40,000 Tata Realty And Infrastructure Limited
Debentures | -2% ₹360 Cr 36,000 Rural Electrification Corporation Limited
Debentures | -2% ₹326 Cr 32,500 Bharti Telecom Limited
Debentures | -2% ₹325 Cr 3,250 7.3% Govt Stock 2028
Sovereign Bonds | -2% ₹317 Cr 31,500,000 Bajaj Housing Finance Ltd. 8%
Debentures | -2% ₹301 Cr 30,000 3. ICICI Prudential Ultra Short Term Fund
CAGR/Annualized return of 7.4% since its launch. Ranked 27 in Ultrashort Bond category. Return for 2023 was 6.9% , 2022 was 4.5% and 2021 was 4% . ICICI Prudential Ultra Short Term Fund
Growth Launch Date 3 May 11 NAV (20 Dec 24) ₹26.6237 ↑ 0.00 (0.01 %) Net Assets (Cr) ₹13,935 on 15 Dec 24 Category Debt - Ultrashort Bond AMC ICICI Prudential Asset Management Company Limited Rating ☆☆☆ Risk Moderate Expense Ratio 0.86 Sharpe Ratio 1.92 Information Ratio 0 Alpha Ratio 0 Min Investment 5,000 Min SIP Investment 1,000 Exit Load 0-1 Months (0.5%),1 Months and above(NIL) Yield to Maturity 7.6% Effective Maturity 5 Months 16 Days Modified Duration 4 Months 28 Days Growth of 10,000 investment over the years.
Date Value 30 Nov 19 ₹10,000 30 Nov 20 ₹10,677 30 Nov 21 ₹11,105 30 Nov 22 ₹11,583 30 Nov 23 ₹12,385 30 Nov 24 ₹13,303 Returns for ICICI Prudential Ultra Short Term Fund
absolute basis & more than 1 year are on CAGR (Compound Annual Growth Rate) basis. as on 7 Aug 22 Duration Returns 1 Month 0.5% 3 Month 1.8% 6 Month 3.5% 1 Year 7.5% 3 Year 6.3% 5 Year 5.9% 10 Year 15 Year Since launch 7.4% Historical performance (Yearly) on absolute basis
Year Returns 2023 6.9% 2022 4.5% 2021 4% 2020 6.5% 2019 8.4% 2018 7.5% 2017 6.9% 2016 9.8% 2015 9.1% 2014 14.8% Fund Manager information for ICICI Prudential Ultra Short Term Fund
Name Since Tenure Manish Banthia 15 Nov 16 8.05 Yr. Ritesh Lunawat 15 Jun 17 7.47 Yr. Data below for ICICI Prudential Ultra Short Term Fund as on 15 Dec 24
Asset Allocation
Asset Class Value Cash 59.36% Debt 40.4% Other 0.24% Debt Sector Allocation
Sector Value Corporate 49.72% Cash Equivalent 40.03% Government 9.31% Securitized 0.71% Credit Quality
Rating Value AA 16.21% AAA 83.79% Top Securities Holdings / Portfolio
Name Holding Value Quantity 364 Days T - Bill- 06/02/2025
Sovereign Bonds | -3% ₹394 Cr 40,000,000 364 DTB 13032025
Sovereign Bonds | -3% ₹392 Cr 40,000,000 LIC Housing Finance Limited
Debentures | -3% ₹385 Cr 3,850 Small Industries Development Bank Of India
Debentures | -3% ₹373 Cr 3,750 Bharti Telecom Limited
Debentures | -2% ₹326 Cr 32,500 India (Republic of)
- | -2% ₹298 Cr 30,000,000 L&T Metro Rail (Hyderabad) Limited
Debentures | -2% ₹298 Cr 3,000 Rural Electrification Corporation Limited
Debentures | -2% ₹235 Cr 2,350 LIC Housing Finance Limited
Debentures | -2% ₹225 Cr 2,250
↑ 2,250 Oberoi Realty Ltd.
Debentures | -1% ₹200 Cr 20,000
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