In the family of mutual funds, Birla Sun Life Income Plus is one of the most elderly members. The fund, one of the earliest entrants in the debt medium-term category, is on its way to completing 13 years.
Birla Sun Life Income Plus was conceived to deliver steady returns by taking moderate risks in the money market. The fund was launched in 1996 and made news in its first year by delivering returns of over 18 per cent. 1996 to 2002 were the golden years for the fund when it delivered an average of 15 per cent returns every year. However, the fund came down crashing in 2003 with the firming of interest rates. Things turned from bad to worse in 2004, with the fund posting negative returns of 1.08 per cent. The fund’s corpus shrunk by over 90 per cent during this period.
Things started to look better for Birla Sun Life Income Plus with the appointment of Mr. Maneesh Dangi as the fund manager in 2007. He took a bold call that the interest rates would soften and started investing heavily in long-term papers. The fund’s average maturity went up to 6.21 years between January 2007 and January 2008, when the category average remained at 5.19 years. Dangi’s call however proved to be successful as the interest rates did soften and the fund’s returns started going up. In 2007, the fund delivered the third highest return of the category at 12.57 per cent.
Over the year, the fund has invested in diverse instruments including debt funds like Birla Sun Life Bond Index and Birla Sun Life Liquid Plus (formerly Birla Bond Plus). Structured Obligation has been one of its favorite instruments other than Debenture and GoI Securities. It had at times invested as high as 27.38 per cent (Feb, 2006) of the net assets in structured obligations. The commercial paper issued by ICICI Bank and bonds issued by Power Finance Corporation has been a particular favorite of this fund. Government securities like Oil Bonds have also made appearance in its portfolio.
The current economic scenario is very much the opposite of what it was in 2007. The key rates have gone up and are expected to rise further in the coming months. Even though the fund has significantly brought down its investments in long-term papers, its past performance remains a ready reminder of what could happen to the fund.
This article was originally published on November 21, 2008.
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