JM G-Sec Regular Fund, seeks to provide safety to investors through its investment exclusively in sovereign securities or Gilts of medium to long-term maturity.
Launched in September '99, in its brief tenure the fund has been a blitzkrieg among Debt funds. For one the fund, with its gilt focus has obviated any problems arising on the credit quality and liquidity front. Thus the fund is left only with interest risk to handle. A fall in interest rate would see a rise in the prices of debt instruments and vice versa with the maximum impact on longer dated papers and more so in Gilts. This explains the higher volatility in the Gilt funds vis-a-vis other bond funds.
JM G-Sec Regular Fund is an aggressively managed fund with investments in long-dated papers. However, what is admirable is the fund's knack of checking the down side too. The fund's best and the worst returns bear this out. While, the fund's aggressiveness yielded it top of the heap returns during the steady markets, it managed to actively realign its portfolio maturity during pressure on interest rate so as to emerge with fewer red marks. Despite, the rise in interest rates in July 2000, the fund with a maturity profile of 3.9 years, continued with positive returns while many of its peers turned in the negative territory during the volatility between May to July 2000.
Currently, with the portfolio maturity at 13 years, is more aggressive than the institutional centric fund, JM G-sec PF fund and is hence well positioned to capture the gains of the current rally. JM G-Sec Regular Fund may have yielded exceptional returns. However, given the aggressive management and concentrated portoflio, any mistake on the call on interest rate outlook, the fund could be a severe casualty.