A change in strategy is a must to perk returns, for if Chola Gilt continues to manage its small kitty conservatively, it will only offer insipid returns
27-Jun-2001 •Research Desk
Chola Gilt Investment is debt fund dedicated to investments in Government Securities or Gilts. Investors can enter and exit the fund on a no load basis. Under its dividend option the fund has paid 3 dividends aggregating to 8.7 per cent.
Gilts are sovereign debt instruments and hence carry virtually a nil possibility of default. However, this added safety translates in to a lower coupon income for the fund. While Gilts face lower degree of credit risk, with their high liquidity, they are highly susceptible to interest rate risks.
Bonds, particularly Gilts move sharply in response to interest rate changes. They gain in value with a rate cut and shed value in times of a rate hike. This sensitivity is more pronounced in longer dated instruments. Chola Gilt holds the mandate to invest in Gilts with medium to long term maturity, with the average maturity of the portfolio not exceeding 8 years.
Even while the mandate permits an aggressive strategy the fund has been rather conservative with its maturity, stretching up to a maximum of 5 years. With is cautious stance, the fund has posted a return of 9.775% against a category average of 10.59% for the one year ending June 22. Further, at Rs 12 crore, the fund is yet to gather critical mass.
If Chola Gilt continues to manage its small kitty conservatively, it will only offer insipid returns.