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Birla Dynamic Bond Fund has generated has assumed lower risks & generated above average returns

The objective of Birla Dynamic Bond Fund is to manage the duration of the bonds it invests in dynamically, keeping in mind the interest rate scenario. The fund is benchmarked against CRISIL Comp BFL.

So far, the fund has turned in a relatively good performance. In 2007, it generated returns of over nine per cent, which was almost two per cent more than its peer set. In previous years too, the fund has been able to deliver above average returns. The fund's ability of giving above average returns, coupled with its lower risk grade has propelled the fund to the top quartile of the medium term fund category.

As the mandate proposes, the fund is actively managed to profit from the interest rate movement. In December 2007, it increased the average maturity of its holdings to 11 years from around three years and then again decreased it drastically to just 36 days in January, 2008. The success of this tinkering with the portfolio is that the returns of the fund surged ahead of the pack both in December and January.

The fund maintains a focused portfolio with most of its investments limited to call money, short term instruments like Commercial Paper and Certificate of Deposits while in the longer time horizon, it invests primarily in Debentures or GOI securities. The fund has stayed away from the risky and less liquid Structured Obligations. For this fund, the liquidity of investment is of paramount importance than returns, which is the reason behind its heavy investment in high quality instruments.

The fund has taken active management of assets to another level. It has since March 2008, started to actively manage its inflows and outflows by increasing and decreasing its exit load at times twice a month. This has enabled it to create a time horizon and be reasonably unaffected by sudden huge influx or redemption.

The fund's performance and portfolio quality, together with its low risk, makes it an attractive option in the medium term category.