With a return since launch at 9.13%, K Gilt Serial 2001 has emerged as a interesting option. However investors should not consider the fund, if they are not willing to wait till maturity
25-Jun-2001 •Research Desk
K Gilt Serial 2001 is a special class within the category of gilt funds, which invests in instruments due for maturity in or before 2001. Thus with in its basket of Gilt investments, the fund is focussed on shorter maturity instruments. While entry is at NAV, exit with in 30-calendar days faces a load of 0.15%.
Gilt funds with their commitment to invest only in government securities are like sectoral funds in the debt category. Government securities with their sovereign backing carry minimal credit risk. Also, with their extremely high liquidity, they offer high trading profits.
Interest rate sensitivity is the other important component of bond performance. As interest rates move down, bonds gain value and vice versa. However, this sensitivity to interest rate changes is lower for shorter maturity instruments.
As the name suggests, K Gilt Serial 2001 has chosen to commit its investments to government instruments maturing only in year 2001. With fund focussed on shorter maturity instruments, this the interest rate sensitivity is minimised. However, the shorter maturity notwithstanding, investors are best hedged against this price risk by holding fund till maturity.
With a return since launch at 9.13%, K Gilt Serial 2001 has emerged as a interesting option. However, considering that it is not totally insulated from price risk, investors short not align with the fund as a short-term parking lot. Instead consider this fund if your are clear that the fund's maturity in December 2001 matches with your cash requirement.