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Flexible Performer

Its good record in high interest rate times makes Kotak Flexi Debt Regular a good investment

Kotak Flexi Debt Regular, as its name suggests, has been devised in a way so as to give the fund manager enough flexibility with his investments. The fund manager, depending upon his interest rate outlook, can invest fully either into long-term or short-term securities.

The fund has chosen the CRISIL Composite Bond Index as its benchmark and so far, has been a consistent performer. The quarterly returns of the fund have never dropped below the peer average, except once. The fund has generated returns of 7.12 per cent and 8.54 per cent annually over the past two years. It was awarded the 5-star rating in June 2006 and since then it has consistently maintained its rating except on very rare occasions where its rating has fallen to 4-stars.

Since January 2006, the fund has made a conscious effort to keep its average maturity at the six month level compared to the peer average of above one year. This has enabled the fund to perform well whenever the interest rates have hardened. The fund manager believes in keeping its average maturity low and has been very much reluctant in increasing the same even when the interest rates soften. At times, this has led to a downfall in the fund’s returns.

The fund has regularly kept a larger allocation in the high quality short-term instruments, rather than long-term securities. It has on an average kept a 40:60 ratio between long-term and short-term securities. Structured Obligations have regularly made an appearance in the fund’s portfolio, especially the ones issued by finance companies. The fund has also kept a part of its portfolio in term deposits so that it can take advantage of sudden opportunities in the illiquid debt markets.

Overall, give the fund’s performance in high interest rate periods, it is expected to be an attractive investment option in the coming times.