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Steady as a Rock

This fund delivered an astounding 35.17 per cent placing it in the 6th rank that year

Over the last few years, Canara Robeco Gilt PGS has established itself as one of the steadier performers of this category. In the five years since 2004, it has more than kept pace with its peers, either outperforming the average gilt fund handsomely, or lagging by a small margin. All in all, Rs 1 lakh invested in this fund would be Rs 1.47 lakh today, as against Rs 1.34 lakh for the average gilt fund. In fixed income terms that's a fair difference.

During 2008, which has been a signature year for gilt funds, the fund's returns were an astounding 35.17 per cent, which gave it the 6th rank for the year. However, what impressed us more was the fund's progression through what was an exceptionally turbulent year. During the first three quarters, the fund was ahead of the category average by an average of 2.64 per cent every quarter, adding up to a cumulative lead of 7.92 per cent. In the last quarter, it exploited RBI's interest rate bonanza just as well as the rest, with returns of 20.63 per cent for the three months.

However, the fact that the fund matched the average and did not do as well as the top funds during the quarter looks like a positive sign to us. When we observe the maturity changes that fund manager Ritesh Jain affected during that phase, we see a degree of conservatism which we like. During the October liquidity crisis, the fund manager dropped the maturity. When the RBI unexpectedly softened rates in November, the fund gained less than its peers.

Investors shouldn't mind this because dropping yields during the global liquidity crisis was a safer course of action. The point is proven when we look at how things played out in 2009. All gilt funds have suffered during this period. However, the funds' lower maturity has helped in containing the downside well in January and February 2009. Canara Robeco Gilt PGS was down by 3.01 per cent and 0.76 per cent while category was down by 6.23 per cent and 1.74 per cent (January & February) respectively. It must be noted that the fund's 2008 performance was at the hands of two fund managers. Suman Prasad was at the helm till June 2008, when Ritesh Jain took over. Jain came from Kotak Mutual, where he ran Kotak Floater LT, Kotak Flexi Debt, Kotak Gilt Inv Regular and Kotak Balance during his 3-year stint.