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Controlled Aggression

An interesting fact about this fund's performance is that it has done well in both rising and falling interest rate regimes

Templeton IGSF Long-Term is a gilt fund that has managed to implement a remarkably balanced approach. It has never raced ahead leaving other funds in the dust; but it has never suffered a severe reversal either. In the seven years since it was launched, its annual returns have always been ahead of the category average. Also, they've always been positive-even in 2004 when the going was tough and the category as a whole lost money (-0.40 %), this fund made a reasonable gain of 2.95 per cent.

The most interesting fact about this fund's performance history is that it has done well during both rising and falling interest rate regimes. Between February and July 2008 the yield of the 10-year benchmark paper rose from 7.56 per cent to 9.33 per cent, the fund generated on an average 0.20 per cent return monthly while the category was down with a negative 0.19 per cent return. The average maturity period of the fund was 3.40 years vis-à-vis category's 4.09 years. From August the yield started declining and by the end of December it reached 5.25 per cent. The fund gained 4.06 per cent return in comparison to category 4.34 per cent. The average maturity of the fund was 5 years while its category was at 8.74 years. Again in January 2009 when the yield rose to 6.21 per cent, the fund was down by 0.35 per cent while its category was down 6.23 per cent. The average maturity of the fund was 7.61 years while the category was 12.54 years. Incidentally, during this period (in June 2008), Vivek Ahuja replaced Ninad Deshpande as the fund manager. Deshpande had been at the helm for almost two years.

In its seven years, this fund has reported a maturity less than its stated three years for 13 months. This has helped it handle rising interest rate situations better than many others in the category. The conservative attitude has also meant that the fund exploited the 2008 Q4 bonanza less effectively than category leaders. However, returns for 2008 were still a solid 27.65 per cent, well ahead of the category's 24.94 per cent.

For investors who'd like to balance caution and aggression, Templeton IGSF Long-Term is ideally suited for trying out the occasionally troublesome category of gilt funds. It manages to deliver the better aspects of gilts while filtering out the worst.