Gilt Fund

DEFINITION of ‘Gilt Fund’
A mutual fund that invests in several different types of medium and long-term government securities.

Gilt funds differ from bond funds because bond funds invest in corporate bonds, government securities, and money market instruments. Gilt funds stick to high quality-low risk debt, mainly government securities.

Since gilt funds invest only in government bonds, investors are protected from credit risk. The instruments where these funds invest have sovereign guarantee. Hence no default risk is associated with these instruments. Gilt Funds are preferred by risk averse and conservative investors who wish to invest in the shadow of secure government bonds.

These funds can have different maturity profiles. Like any other bond funds, these funds too have interest rate risk ingrained in them.

 

Source of information:Economic time/ investopedia



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