Why fund managers are mixed on gilt funds

“Staying invested for a period close to a fund’s duration, typically over a seven-to-nine-year horizon can help to reduce the impact of volatility. When your holding period is longer, the effects of interest rate movements largely cancel out. If yields rise, the fund’s NAV falls in the short term, but the fund reinvests its interest income and maturing bonds at the higher yields, which makes up for that loss over time. So, your return ends up close to the yield at which you entered. And if yield levels normalize, you also stand to benefit from capital appreciation. Yield of close to 7.5% is a good level to lock-in for investors with a longer investment horizon,” said Ashish Chadha, a registered investment advisor.