K Bond has always had a penchant for quality papers. It was its skill at interest risk management that has been honed gradually and the results are already showing.
Under its quarterly dividend payout, the fund has paid five dividends aggregating to total 15.44%. The fund offers loyalty premium of 0.25 per cent, 0.60 per cent and 1 per cent (of the exit NAV) to investors who stay with the fund for 1-2 years, 2-3 years and over 3 years, respectively. K Bond Deposit , with its medium-sized corpus, has handled both credit and liquidity risks by largely parking in triple A-rated papers. While this focus has only sharpened over time, the fund nevertheless has also shopped in AA and un-rated papers for the rest of its corpus, with an eye to pick up yield.
Interest risk management, the other factor affecting bonds, calls for altering the portfolio maturity in line with the outlook. For bonds gain value with a lowering of interest rates, and vice versa. Launched at a time when the debt markets were heading for a rally, the fund started off with a longer maturity portfolio, which was subsequently realigned with a hike in interest rates in July 2000. Despite active management however, the fund was one of the top losers in volatile markets of mid 2000.
However, resurrecting itself since October, K Bond has gained impressively with active interest risk management. On the back of a medium-sized corpus, the fund has turned in a category topping performance at 14.56(one -year0, albeit with some aggression.
With a medium sized corpus at Rs 392 crores, K Bond Deposit is well positioned to pursue a nimble footed strategy. If it continues taking the right call on interest rates, it could emerge among the top quartile.