Launched in the last quarter of 2002, the fund's equity exposure over the next two years averaged around 5 per cent, making it a distinct underperformer. From 2005 onwards, its returns hovered around the category average. The turn in fortune has come about in the past two years when it has significantly outperformed the category average. Incidentally, this coincides with a change in its investment mandate. Till August 2007, the fund manager could only invest a maximum 10 per cent of its portfolio in equity, which was then upped to 15 per cent. However, there were numerous instances when the equity exposure crossed 10 per cent (when that was the limit).
A noticeable trait is its ability to protect the downside. Of the total six quarters in which its category has been in the red, the fund has outperformed in all barring the second quarter of 2008. During that quarter, its equity exposure hovered at around 13 per cent. In fact, it maintained that average for the entire year despite the equity market's collapse. When the market began to pick up in 2009, this certainly helped.
While on the equity side it maintains a diversified portfolio with a large-cap tilt, its conservative stance is reflected on the debt side too. Its average maturity has never gone above 4 years. But there have been instances when it takes a call opposite to the category average. In 2004, the fund increased its portfolio maturity from 1.54 years (April 2004) to 4.06 years (September 2004), while the category average came down from 2.79 years to 1.55 years. The move worked well for the fund in the initial quarter but backfired in the following one.
Towards the end of 2008, the category average maturity increased from 1.88 years (October 2008) to 3.98 years (February 2009) while fund's maturity came down from 2.65 years to 2.43 years. The move paid off. Currently, the fund's average maturity is 2.37 years (category average: 1.67 years). Since September 2008 the fund has distributed a 0.53 per cent dividend every month.
This fund is apt for conservative investors who prefer consistent returns over sporadic bursts of outprformance. A small concern is the gradual rise in its expense ratio over the past year.