Reliance Income doesn't outshine competition but stands out for the stability with which it generates returns. Its standard deviation – a measure of volatility – is 0.71, one of the lowest in the category and is also less than category average. With proactive management, it has earned a handsome 15.48 percent in 2001. While returns of 13 per cent over the last four years are also equally commendable.
Overall the fund has provided decent returns throughout, which are largely in line with the category average. This has been because of it primary focus on corporate bonds and a cautious approach towards government securities. Although this strategy is in contrast to other schemes of the category, which went gung-ho on gilts.
It has meticulously followed its stated objective and has maintained moderate risk at all times. Initially the strategy of focusing on high rated corporate bonds along with lower rated bonds for higher returns worked wonderfully. But as the size of the fund increased, it moved out of lower rated papers thus enhancing overall portfolio quality. The allocation to unrated, AA and other such papers, which was 44 percent in March 2000, has been drastically reduced and stands at 7 percent now.
Reliance Income has actively managed its government bond allocation over all time periods. And has aligned maturity according to the interest rate outlook. But this year in May, when gilts formed one of the main investment avenues after AAA bonds, it burnt its fingers. Losing 0.64 per cent, more than twice the category average. Just before the credit policy it reduced the average portfolio maturity by moving into shorter duration securities. This change in tack made it provide 1.51 per cent return in the month of October, while an average fund showed return of 1.38 per cent.
The fund has been consistent in providing decent returns while maintaining high credit quality. It is a good choice for low risk investors.
This article was originally published on November 12, 2002.
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