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Simply Superb Till Now

A quality portfolio without compromise on returns has been this fund's hallmark. It has, however, only seen sunny days. Its mettle is yet to be tested in troubled waters

With underlying markets in a bullish zone since its launch, Grindlays Super Saver Income Fund's two-year stint has been a smooth ride. Without going on extremes, it has delivered one of the best performances, during 2001- one of the high flying years for bond funds. As the markets sober down in the calendar, so have the fund's return, which place it in the middle of the category.

But then there have been flip sides too. Like others, this fund also witnessed a dent in the NAV, on volatile occasions. But the extent of losses had been sharper. The vulnerability is perhaps on account of being a no-load bond fund as well. However intermittent volatility in debt funds is what investors should get used to now.

Grindlays Super Saver Income doesn't believe in radical portfolio changes. Its conservative while shopping for corporate bonds—doesn't look much beyond the high quality issues. The overall strategy is guided by a process styled as "3D Factor Process", which takes into account the key factors that drive interest rates i.e. economic fundamentals, market psychology and market valuations. This process contributes in determining the portfolio duration of the fund.

Yet, there have been changes in the way it manages interest rate risk, but not in a very drastic way. Nowadays, the fund manager makes long-term interest rate bets more often. Its average maturity has largely stayed above 5 years in 2002 so far. Still on relative basis, it's been largely in line with its other medium-term debt peers. On the credit risk spectrum, while its peers hold out that lower rated corporate bonds stand a strong chance of quality upgrade when economy recovers, the fund seems to believe in the opposite—i.e. chances of further downgrade are higher with lower rated bonds. Thus the exposure to lower rated corporate bonds has ranged in between 10-15 per cent throughout. Besides, in a brief span of time, attaining an asset base of over Rs 2000 crore has helped the fund translate in to lower cost for investors too.

Overall, with an unflinching commitment to a quality portfolio, reasonably active interest rate bets, Grindlays Super Saver Income Fund is a fine choice for conservative investors.