Make no mistake, this is an aggressive fund. Fund manager Rahul Goswami has been running the show since October 2005 and his reign has been marked by generally long maturities, aggressive calls and quick movements. For the most part, this has worked out well, especially in the recent past. While 2008 was a great year for practically all gilt funds, this fund was shining much brighter than all others. During the year, its returns were 45.44 per cent, far higher than the average of 24.94 per cent. Even the number two fund was way behind at 36.98 per cent.
The returns were a result of a characteristically nimble action on the maturity front. When the yield came down from 9.33 per cent (July 2008) to 8.67 per cent (August 2008), the fund increased its maturity profile from 9 months to 12 years. As interest rates kept falling further Goswami increased maturity further to 18.16 years by the end of December 2008. At that point, the average maturity of the other funds of the category was an average of 13.70 years. This gap is what produced the superb performance for the fund.
However, the next two months showed investors the flip side of the approach. In January and February 2009, the fund manager expected interest rate to go down further and increased the average maturity to 20.19 years (February) while its peers reduced it to 10.82 years. However, when the yield moved up from 5.25 per cent (December) to 6.40 per cent (February) the fund lost money.
Commendably, its losses in January and February were in line with the category average (-6.63% vs -6.23% and -2.07% vs -1.74%). During January and February, the fund held a rank of 18 out of 47 funds in the category. Still, this entire episode underscores the importance scoring big whenever its possible. Because the fund exploited 2008 so well, its very much top of the heap over the entire period (January 2008 to February 2009). Over a longer term too, this is an outperformer. Since its launch in November 2003, there has never been a year when its returns were less than the category average.
The bottom-line is that this is a smartly-run fund, albeit an aggressive one. If this is the profile you are looking for then ICICI PRU GILT Investment PF is a first rate choice.