What are accrual funds? How are they different from duration funds?
Accrual funds are debt mutual funds which focus on earning interest income primarily from the coupon offered by securities they hold in their portfolio. On the other hand, duration funds, in focus on generating a significant portion of returns from the capital appreciation that happens when interest rates decline. Accrual funds can also make some returns from capital gains, but these typically tend to be a small portion of their total return. Accrual funds typically hav a buy and hold strategy. Instruments bought in the portfolio are held till maturity. Compared to this, duration funds are actively managed depending on the interest rate view of the fund manager.
