K Gilt '98 Savings Plan is a first short term Gilt fund dedicated to investments in Government Securities. A no load fund, investors can participate in the fund with minimum investment of Rs 10000. Under its monthly dividend option the fund has a consistent track record of dividend payout aggregating to 18.72%.
The Gilt or Government Securities focus, places the fund in the high credit quality bracket, for Gilts carry minimal credit risk. Further being the most actively traded securities, they enhance the portfolio liquidity and allow the fund manager to change strategy actively.
Liquidity, while contributing to the manager's flexibility adds to the interest rate risk of the portfolio. Bond prices move out of tandem with interest rates - gaining value in times of a rate cut, and losing value in times of a hike. With longer dated papers being more sensitive to this movement, the lower maturity focus of the fund shields it from sharp volatility. The fund seeks a 70 % allocation to G-Secs with balance allocated to instruments with less than a year's maturity.
Managing in line with its defined objective, the fund has held the portfolio maturity with in 1.5 years. With a conservative yet active strategy the fund has delivered a 10.8124% to outperform its benchmark. It has also helped the fund minimise the risks associated with Gilt investing.
While K Gilt has been well managed to perform in line with the category. However, despite its conservatism investors should seek the fund only for a short to medium term horizon to avoid any unpleasant surprises.