ICICI Prudential Gilt Investment PF was the best performing fund in India in 2008! An astounding achievement considering the fact that it is a gilt fund. And over the past five months, its performance has left investors speechless. Consider October 2008. The fund returned 12.21 per cent when the category average was just 4.37 per cent. Barring 2005, this fund has been a top quartile performer since its launch in 2003.
Its performance is backed by a great portfolio. With government securities (G-Secs) and occasionally commercial paper (CP) and certificate of deposit (CD) from banks, the credit quality is unquestionable.
Where aggression is evident, is in the portfolio maturity risk which is considerably higher than its peers. For example, it's October 2008 performance was due to the average maturity of 11.50 years, when its peers were at an average of 7.35 years.
Last year, the fund was very nimble. As the yield came down from 9.33 per cent (July 2008) to 8.67 per cent (August 2008), the fund instantly increased its maturity profile from 9 months to 12 years, and beat the category average in the bargain. And as the interest rate kept falling from mid-September, it was quick to increase its maturity profile to 18 years (December 2008). Thus resulting in 36 per cent return vis-à-vis the category average of 21 per cent for the October-December 2008 quarter.
When Rahul Goswami took over as fund manager in October 2005, there was a discernible shift in the maturity of the portfolio towards the higher side. And there have been times when the bet did not pay off. For instance, from the end of 2006, when the yield was on the uptrend, the fund maintained an average maturity of around 19 years (January 2007) when the category average was just 5.13 years. The fund was down 1.56 per cent while the category managed a 0.19 positive return.
On the expense front too, the fund has not disappointed. It has managed to maintain a stable expense ratio of 1.10 per cent which is a bit on the higher side, yet lower than the category average of 1.26 per cent.
The fund has been a consistent performer but it does take aggressive stances. If you are comfortable with it and would like a gilt exposure, then go for it.