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ICICI Prudential
Short Term Fund
Data as on 28 February 2026 · Inception: 25 October 2001
What Is This Fund?
The ICICI Prudential Short Term Fund is an open-ended debt mutual fund that invests in a range of debt and money market instruments. Its defining feature is that the Macaulay duration of its portfolio is always kept between 1 and 3 years — think of this as the fund's average "waiting period" before its investments mature. A shorter duration generally means less sensitivity to interest rate swings, which keeps the ride smoother for investors.
The fund's core goal is to generate a steady income while carefully balancing three things: yield (how much it earns), safety (the credit quality of the instruments it holds), and liquidity (how easily it can sell those instruments if needed). It is ideally suited for investors with a time horizon of 6 months and above who want better-than-savings-account returns without taking on the full risk of equity markets.
Simple analogy: Think of this fund as a well-managed short-term lending portfolio. It lends money to high-quality companies and the government for 1–3 years, collects interest, and passes most of that income to you as a return — while also trying to benefit from any fall in interest rates.
Key Numbers at a Glance
Before diving deeper, here are the most important numbers that define where the fund stands today.
as of 27 Mar 2026
as of Feb 2026
annualised
of the portfolio
of holdings
Regular plan
The ₹22,852 crore AUM makes this one of the larger short-duration debt funds in the country, which typically means better liquidity and lower transaction costs. The 7.41% YTM is particularly attractive because it represents the current "running yield" — roughly what the portfolio would earn if all instruments were held to maturity, before expenses.
What Does It Invest In?
The fund's portfolio is carefully diversified across several types of fixed-income instruments. As of February 28, 2026, here is how the money is distributed:
Looking at credit quality, the majority of the portfolio is invested in the highest-rated instruments. About 55.76% sits in AAA-rated or equivalent securities — the safest corporate credit category. Another 22.56% is in sovereign (government) securities, which carry zero default risk. About 18.09% is in AA-rated instruments, which are still considered high quality but carry a marginally higher risk in exchange for a slightly better yield.
The top individual holdings give a good sense of the kinds of borrowers the fund trusts: NABARD (8.48%), Small Industries Development Bank of India (6.23%), LIC Housing Finance (5.89%), and a GOI bond maturing in 2035 (4.25%). These are all well-known, well-regulated institutions — a reassuring sign that the fund manager is not chasing risky high-yield paper.
How Has It Performed?
Performance data is as of February 27, 2026, compared against two benchmarks: the NIFTY Short Duration Debt Index A-II (primary) and the CRISIL 10 Year Gilt Index (additional).
| Period | Scheme CAGR | Benchmark CAGR | ₹10,000 grew to |
|---|---|---|---|
| 1 Year | 7.66% | 6.89% | ₹10,763 |
| 3 Years | 7.71% | 7.34% | ₹12,496 |
| 5 Years | 6.54% | 6.03% | ₹13,731 |
| Since Inception | 7.82% | 7.44% | ₹62,618 |
The fund has beaten its benchmark across every time period shown — 1 year, 3 years, 5 years, and since inception. While the outperformance margins might look small (often less than 1%), they are quite meaningful in a debt fund context where the overall returns are in the 6–8% range. Consistent outperformance over more than two decades is a strong signal of disciplined fund management.
The "Since Inception" CAGR of 7.82% is especially noteworthy: an investment of ₹10,000 made at the fund's launch in October 2001 would be worth over ₹62,600 today — a more than 6× multiplication, entirely from a debt fund.
Understanding the Risks
No investment is without risk, and it is important to understand what you're signing up for. The fund's official risk label is "Moderate" on the riskometer — placing it firmly in the middle ground between very safe liquid funds and riskier long-duration or credit funds.
The two main risk types in a debt fund are interest rate risk and credit risk. This fund falls in the "relatively high" interest rate risk bucket (because even a 2–3 year duration can be meaningfully impacted by rate changes) and "moderate" credit risk (because most of its holdings are AAA or sovereign, but it does take some AA exposure for yield). In the Potential Risk Class matrix, the fund is classified as B-III — moderate credit risk, relatively high interest rate risk.
What does this mean practically? If the Reserve Bank of India were to sharply hike interest rates, the fund's NAV could temporarily dip, since bond prices fall when rates rise. However, because the duration is relatively short (under 3 years), this impact would be meaningfully less severe than a long-duration gilt fund. The fund is not a "park and forget" option like a savings account — but for a 6-month-or-more horizon, short-term NAV fluctuations tend to smoothen out.
Fund Manager's Market View
The fund is managed by Manish Banthia (managing this fund since November 2009, with 21 years of overall experience) and Nikhil Kabra (since December 2020, with 11 years of experience). Their combined depth is a meaningful factor in the fund's track record.
As of the latest fund update, the managers note that the January–March quarter typically sees seasonal liquidity tightness because government spending is delayed, causing yields on short-duration instruments like Certificates of Deposit (CDs) to rise temporarily. They view this as an opportunity for short-duration funds to capture elevated yields — precisely the segment this fund operates in.
On government bonds, the team believes that market nervousness about the end of the RBI's rate-cutting cycle is overblown. They argue that the demand for G-secs from banks, NPS funds, and the insurance sector remains structurally strong, and that current yield levels already price in most of the bad news. In their view, yields are unlikely to rise significantly further, making this a reasonable entry point for short-to-medium duration debt investing.
Who Should Consider This Fund?
This fund fits best for investors who tick most of the following boxes: they want returns better than a Fixed Deposit or liquid fund; they can stay invested for at least 6 months, preferably 1–2 years; they want a high-quality portfolio without chasing risky paper; and they are comfortable with the NAV moving up and down a little (but not dramatically) with interest rate changes.
It is less suitable for someone who might need to withdraw money urgently within a few weeks, or for someone who cannot stomach any short-term negative returns on their statement. It is also not the right choice for someone seeking equity-like long-term wealth creation — this is an income and capital preservation tool, not a growth engine.
Important reminder: Mutual fund investments are subject to market risks. This report is for informational purposes only and does not constitute investment advice. Please read all scheme-related documents carefully and consult a registered financial advisor before investing.
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