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Uncompromising Attitude

The aggressive maturity calls made by Kotak Bond Regular has well rewarded investors...

With an aggressive tilt, the fund has outperformed its category (Debt-medium) in every year since its launch. It has been among the top rank holders in the category in six out of the total nine years of its existence.

But aggressive maturity bets makes the fund more vulnerable to interest rate changes and this has led it to witness a sharper drop in almost every month whenever the category has been in the red. However, this has not stopped the fund manager from taking aggressive maturity calls. Investors have been well-recompensed from this aggression. Neither is he seen compromising on the quality. It largely remains highly rated.

In December 2008, when yields started falling, the fund manager audaciously increased the average maturity of the portfolio to 11.93 years. He moved up the exposure to G-Secs from just 3.66 per cent in September 2008 to 53.42 per cent in December 2008.

The result was yet another constructive step as the fund did benefit from this move turning in an astounding 15.49 per cent in December 2008 against the category's 7.59 per cent.

But as yields started moving up suddenly from January 2009, the fund experienced a fall of 5.54 per cent against the category's 3.30 per cent in the quarter ending March 2009.

Currently (June 2009), the fund's maturity of 9.90 years is on the higher side.

The fund has invested a majority of its portfolio in G-Secs and debentures while investing small portions in commercial papers intermittently.

The fund is a tad high on the expense side, compared to its category.

The fund will reward those investors who hang on for the long run as it has delivered an annualised return of 11.15 per cent against the category's 7.84 per cent over the three-year period ending June 30, 2009.