Gilt funds invest in government issued medium and long term bonds. They can also invest in high rated (Aaa/AAA rating*) corporate bonds. Gilts/Government bonds are not rated. Gilts/Treasury bonds are considered extremely credit worthy because they are backed by the Governments. If a scenario arises where it has to default it will repay the principal by printing currency. So they are always considered extremely safe.
Some Government Sponsored enterprises are also not rated. They are not explicitly backed by the governments but they have implied Government backing and implied Aaa/AAA rating.
Gilt funds are suitable for the investors who want their investment should be highly safe and can compromise with low returns.
* Please note that in Aaa/AAA, Aaa is Moody’s rating whereas AAA is S&P’s rating. It’s a normal practice to specify the credit rating in this format. Please take a look at Credit Ratings post for more details.
Sathish Emmadi
Sathish Emmadi is a co-founder & editor at Lastbull.com. He is presently working in IT for one of the world’s top mutual fund companies. Handled multiple projects in BFSI (Banking,Financial Services and Insurance) domain. An Engineering Graduate from NITW.
Related posts:
- Bond Funds or Debt Funds
- Bonds Credit Rating
- Bond Market/Fixed Income Market Basics
- Commercial Paper/CP
- Advantages of Mutual Funds
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