Those of you who are interested in the relative safety of a portfolio will find a home here. A fact proved by this fund's widely diversified demeanour -- K-Bond Deposit's portfolio is spread across 86 holdings. The fund's high quality focus, a well-timed investment into lower-rated issues plus dexterous handling of interest rate risk has been a win-win strategy.
Since the fund was launched during the gilt rally in 1999, the fund maintained a higher maturity. However, during the rate hike of July 2000, the fund brought down its maturity but that didn't prevent the fund from nose-diving. In fact, more than 60% of the funds in the category finished ahead of it through 2000.
After a subdued 2000, in the year 2001 -- a stupendous year for bond funds, which witnessed three rate cuts -- the fund's active portfolio management (between bonds and gilts) and a relatively higher average maturity helped the fund regain its health. Clocking a magnificent return of 17.87%, K-Bond Deposit found a place among the top 20% in the category. The fund's median average maturity of 4.8 years through 2001 was among the category's highest.
Although failing to guard against the gilt slide of May 2002 due to relatively higher gilt exposure, the fund is back on its feet again. The fund's year-to-date return (6.17% as against the category's 5.63%) as of July 10, 2002, is enough to rank it in the category's top half. But despite that the fund's management hasn't been tempted to mess with credit risk and interest rate risk. Thanks to the management's mild-mannered approach, the fund's current average maturity of 4.4 years is in line with the category's. That apart, the fund's high-quality focus (about 78% exposure) places it among the less volatile in the category.
All told, this fund makes a pretty compelling case for conservative investors who want decent -- not flashy -- returns from their bond fund offering and also don't want to lose sleep at night (read: low volatility). However, big-ticket investors would be better off with the Wholesale Plan as it offers enhanced return on account of lower expense ratio vis-à-vis its cousin.