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Sundaram Bond Saver

An impressive total return of 13.45 percent renders Sundaram Bond Saver to be a fine choice for superior fixed income with stability. But investors would be better off to realign their expectations with the falling interest rates

Launched in 1997, Sundaram Bond Saver aims stable income from a fixed income portfolio. It has emerged a mid-sized fund with an asset based of over 550 crore. In its dividend plan, the fund has paid regular dividend aggregating 42 per cent.

Sundaram Bond Saver has consistently delivered above average returns. Its three-year return is as impressive as its recent performance. Debt funds continue to post ballistic returns with an average return showing of 15.93 percent with softening interest rates in past one year. The fund has beaten its average peer with 17.01 per cent gain.

Falling interest rates boost bond values, as existing bonds carry higher coupon rates. And the gain is higher with longer duration bonds. The fund increased its gilt exposure to actively realign it duration bets. With its timely duration bets, the fund has profitably negotiated the interest rate change. However, the flip side of actively traded gilt is higher volatility, which renders a portfolio susceptible to wide fluctuations. In September turbulence, the fund lost much more than its peers, despite pruning down its portfolio maturity.

Besides an average 30 per cent allocation to gilt, the fund has been dominantly invested in AAA rated bonds with an average 44 per cent allocation and a marginal position in AA bonds. The fund has taken credit exposure of same issuer with varying maturity, which limits the credit risk of the portfolio as and when the instruments are redeemed.

The fund has been able to strike a good balance between interest income and capital appreciation from trading in gilts. The fund has given an impressive total return of 13.45 per cent (annualized return) since its launch. Besides these returns have in built consistency. Sundaram Bond Saver is a fine choice for investors seeking superior fixed income with stability.