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DSPML Bond

With an active management coupled with quality conscious strategy, the fund has emerged in the top quartile with a return of 13.02% since launch

With an aim to generate regular returns while mitigating credit risk, DSPML Bond has structured its medium sized corpus around a quality portfolio. A no load fund, it has paid out dividends approximating to 12%, 19.3% and 9% in its four years of existence in varying frequency.

Since launch, the fund has focussed on credit quality with an average 89% exposure to AAA bonds. With a steadily growing corpus, the fund was also one of the first to park money in government securities in 1998. Being highly liquid, gilts provide trading opportunities and provide cushion against redemption pressures from big-ticket investors. However, the high quality focus limits the coupon income earned by these instruments. The fund has sought to pick up yield with a marginal AA exposure, which has been capped at around 10 per cent.

While guarding against credit and liquidity risks, the fund actively handles interest risk. As bonds lose value when interest rates go up, AAA portfolio is more susceptible to this volatility. With a nimble footed strategy the fund has aligned the portfolio maturity with interest rate outlook. For instance, while the fund held maturity to 2.12 years in July when rates were hiked, it has increased it to 5.91 years in May 2001 to capture gains in the current rally. While the maturity has since been pruned to 4.6 years, it continues to hover in the aggressive zone. Of late, the fund's gilt exposure has also been on ascend, thus increasing its sensitivity to interest rate gyrations.

The fund has posted a reasonable return of 13.02% since launch on the back of active interest rate management and a quality portfolio. However, the current aggressive stance has increased the element of risk.