GILT Scheme

GILT SCHEMES

Gilt schemes are those schemes that invest their assets into only government securities. The gilt schemes can be short term or long term schemes depending upon the composition of the portfolio of the scheme. These schemes have no credit risk, which means that there is no possibility of the investments of the scheme turning out to be worthless because the issuer has gone bankrupt as in this case the issuing authority is the government itself.

This does not mean that there is no risk for the investor in such schemes because there is interest rate risk which means that in case interest rate rises there will be a fall in the value of the holdings and a consequent fall in NAV for the investors because the value of the holdings will depend upon the conditions in the debt markets and the movements therein.