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K-Gilt Investment Plan

With a decent track record and superior performance during turbulent times, K-Gilt Investment Plan proves to be a decent choice for aggressive investors seeking interest-rate exposure.

K-Gilt, the first Indian government bond fund seeks steady returns. The fund invests a minimum 30 percent in short-term government bonds and the rest in bonds of over 1-year maturity. With its astute management, the fund has consistently delivered above average returns, posting a handsome 16.66 per cent total return since launch.

K-Gilt Investment Plan has also been a front runner through 2001, up 26.86 percent. Long and medium-term gilt fund was the most rewarding fund category in 2001, benefiting from the softening rates and the three rate cuts. But K Gilt Investment has done a lot right in 2001. It kept the fund's duration (a measure of interest-rate sensitivity) higher than its peers for much of the year. That positioning was beneficial as falling interest rates gave longer-duration funds an added lift.

And with return outlook gaining stability it now has its portfolio maturity at 9.41 years as on December 31, 2001, the fund's all time high. The fund has gradually aligned its portfolio with outlook. Through 2000, the fund's maturity ranged between 2 to 6 years while in 2001 it has been above 6 years. With active duration bets, the fund has always been above peers. Also the fund has always been heavily concentrated in its top positions – average 78 percent of net assets in top 5 securities, giving it a high manageability and non-issue for a dedicated gilt fund.

Upheavals in the bond market have caused high volatility in gilt funds. But K Gilt Investment managed the eventful jerky occasions well. The cases in point -- September 11 and December 13, when the fund was able to guard losses better, while half of its peers were in losses. Besides, being a no-load fund the fund also witnessed redemption from anxious investors. Being no-load is a negative for the fund in uncertain times. However, on the strength of his portfolio liquidity, the fund manager Sandesh Kirkire claims total preparedness to take care of such short-term flows.

The year 2001 performance is unlikely to get repeated. The fund will also remain volatile. But for its track record and superior behaviour in turbulent times, it's a decent choice for aggressive investors seeking interest-rate exposure. And a longer investment horizon can help tide over extreme gyrations better.