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Dundee Bond Corporate

Despite its active management, the fund has remained a below average performer

Dundee Bond Corporate is a medium term debt fund launched in November 1999. Under the monthly option, the fund has paid a cumulative dividend of 6.36% for the period January to July 2000. The fund is a no load fund but charges a load of 0.5% for exit within 6 months, for investments under Rs 1,00,000. The fund invests in a diversified portfolio of public and private sector companies and government securities. The portfolio has been actively churned since in line with the changing interest rate expectation, aided by small size. However, the fund largely retained a substantial allocation to AAA papers, which average at 85 % of the corpus. Triple A rated securities, being high on credit quality, are also highly liquid. Bond Funds are subject to interest rate risk - bond prices move up when interest rates go down and vice versa with longer dated securities being more sensitive to this inverse movement. The fund started off with a longer maturity portfolio at 3.64 years, in the midst of a rally, which peaked at 7.65 years in March 2000. The maturity has been reduced since when the interest rates were inching up. However, in August the fund prematurely hiked its maturity to 4.47 years when the rates were still ruling high. Not surprising then that the fund lost 0.28 % in August, when the medium term debt funds gained by an average 0.46%. The maturity has since been reduced and the fund posts a simple return of 7.28 % since launch. Despite its active management, the fund has remained a below average performer.