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Principled

This young fund has climbed the performance ladder quite diligently. Though it has only seen the good half of the market cycle, still, its stability and discipline inspires confidence.

In its brief history, the fund has consistently outperformed its peers with undue volatility. Its trailing one-year return of 14.33% ranks near the very top of the category's performance chart and towers over the category average of 12.64%. Though the fund has only seen an upbeat bond market, its stability cannot be ignored. For instance, out of the 22 monthly returns, the fund has lagged its peers only thrice. Through 2001, taking advantage of the declining interest rate, it raked a handsome 17.67% return. In 2002 as on September 4, it has managed to post a respectable 8.94% return, weathering the turbulence. Year-to-date, it lands in top third among its category peers.

Its portfolio has consistently been spread between government securities and corporate bonds. Nearly a third of the fund of the fund has been invested in government securities. And the average allocation to top rated bonds has been 37%. It has also largely stayed away from lower rated bonds. Even its below AAA rated positions have been on highly liquid issues -- Reliance Petroleum, TISCO and IPCL.

The fund, launched just before the bull-run, maintained a relative longer portfolio maturity through 2001. With three rate cuts it gained handsomely. And it has been fairly consistent without taking wild swings, keeping its maturity in a narrow range of 3.15 and 5.36 years. With raised expectation of rate softening, it has been aggressive in recent months, increasing its gilt exposure to 39.6% and portfolio maturity to 5.8 years. Through this period, the fund has attained superior economy and stability with an asset base of Rs. 504 crore now, from a Rs. 137 crore raised in its IPO.

This young fund looks promising for its solid performance and stability. But it has yet to be through the other side of the bond market cycle.