A Decent Show

Having been around for just over 24 months, it has witnessed 13 continuous rate hikes and a subsequent single rate cut. Though its start was not impressive (it underperformed in the June and September quarters of 2010), it has by and large managed to put up a decent show.

The fund can invest up to 70 per cent in assets with a maturity above 375 days and no limit on investments below that maturity. It started off with a slightly higher-than-average maturity but soon shifted to lower maturity paper bringing down the average maturity of the portfolio to one month in February 2011. The average maturity started to move above one year from June 2011 and touched a high of two years in December 2011. This move backfired and it underperformed its peers in the last three quarters.

The fund has never compromised on the quality and never chased AA and lower rated papers to fetch extra returns. Mid 2011, the fund has been intermittently investing in debentures but Certificates of Deposit (CD) have always dominated the portfolio.

This article was originally published on July 25, 2012.