Consciously staying away from equity in the early days, the fund had gradually acquired an equity stance. With this the fund is pitched towards long term capital appreciation rather than regular income.
Templeton MIP is the second of the new generation MIP launched in February 2000. Besides being open-ended these funds do not assure their returns. Besides the growth option, the fund offers three options – monthly, quarterly & half-yearly dividend plans.
Launched when equity markets were ruling high, the fund consciously avoided exposure to equity, barring a lone stock and thus has guarded against erosion in NAV. However, the fund picked up stocks amid a beaten down equity market, which averages at 6.35% in the last trailing quarter.
Templeton MIP has had a conservative start with a portfolio of predominantly top rated bonds to generate steady returns. However amid a falling interest rate scenario, the fund has augmented its exposure to lower quality instruments, which augment risk while also chipping in higher return. While AAA rated instruments account for 44% of the portfolio, AA rated for a substantial 37% of the corpus. The fund handled interest rate risk by holding on to a conservative maturity, for that would shield it from sharp price volatility.
With a predominant exposure to debt instruments, Templeton MIP has sought exposure to equity instruments to offer capital appreciation – in the long run. However, its marginal equity component is likely to dampen returns in the short run. Its return of a meagre 8.8% since launch bears this out. Thus investors seeking longer-term capital appreciation with a marginal equity component should take a call on the fund.