For ING Income Portfolio, it has been a case of missed opportunities. Despite a moderate size that facilitates active management, the fund has failed to leverage falling interest rates during its tenure to turn in an impressive performance. With a defensive strategy, the two-year return at 11.87% is way below the category average of 12.99%.
Launched in May 1999, ING Income Portfolio aims at attractive income and continuous liquidity along with adequate safety. To this effect, the fund has maintained an average 93% exposure to AAA papers, including sovereign bonds. However, the fund has largely kept a stagnant exposure to government bonds with maturity typically below four years. This indicates that apart from giving up on trading profits, the fund has failed to maximise returns since longer-dated gilts gain more amidst a fall in interest rates. While the fund's average portfolio maturity is not available for comment, holdings suggest that it has stayed at the shorter-end of the yield curve.
Since AAA bonds offer top of the chart credit quality, they chip in with lower interest income for added safety. During its tenure, ING Income Portfolio has also maintained a marginal exposure to below AAA rated bonds for these instruments offer a higher coupon for lower credit quality. However, this minimal investment is unlikely to rake in any substantial returns.
ING Income Portfolio has faltered in its investment strategy and failed to strike the optimum risk-return trade-off. While guarding against credit risk, the fund manager has also been on the back foot when managing interest rate risk. A below category performer for most time periods, the fund has been a disappointment. While the fund has upped its ante recently to take advantage of falling interest rates, it is yet to show up with decent numbers.