The first government securities fund, K-Gilt Investment Plan has posted an annualised 14.86 percent since its launch in December 1998. An above average performance comes with a dexterous portfolio reshuffling in line with fluctuations in the interest rates. In its three-year tenure, the dividend plan has consistently made 8 payouts aggregating to 31.9 percent.
The dedication to government securities, the fund's mandate renders full safety to the portfolio from credit risk along with high liquidity. Insulated from credit and liquidity risk, it's the interest rate sensitiveness, which differentiates between gilt funds. And long dated gilt instruments rise and fall sharply with change in interest rate outlook or movement in interest rates. K-Gilt Investment invests 70 percent of assets in above one-year instruments and rest in instruments maturing within one year. The fund did stretch the portfolio duration in expectation of softening of interest rates, but maintained a cautious stance in times of uncertainty. For instance, driven by the falling interest rates in the current year, the portfolio duration is stretched to over 7 years as compared to an average 4 years till 2000. And with this aggressive stance, the fund is up 17.68 percent against the category average of 16.53 percent on year to date through October 16, 2001.
Despite its conservative stance on duration, the fund has still been volatile. For instance, on the unexpected interest rate hike in July 2000, the fund lost more than its peers, despite a reduced portfolio maturity. And even in the current uncertainty, the fund's weekly returns have fluctuated from –1.73 percent to 2.93 percent. The removal of exit load in August only added to the woes as the fund lost 21% of its assets through redemption to the tune of Rs 89 crore.
K-Gilt Investment Plan continues to be a solid choice for the high-yield investors who aren't looking out for a most conservative government securities fund.