What the MF roll-down strategy means

As yields get compressed and fixed-income returns fall, mutual funds are rapidly embracing the "roll-down" strategy to attract fresh investors. This strategy primarily involves creating a portfolio of a certain maturity and allowing the maturity to fall, till the fund hits the target date. It answers a long-standing problem in open-ended MFs: that you cannot give a definite return unlike, say, a fixed deposit. With roll-down, the industry comes close to a predictable return. Apart from the recently launched Bharat Bond ETFs, a number of debt funds of prominent fund houses, including Axis and Nippon Indian, have turned roll-down in the last year.

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