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A Low Risk Proposition

What Birla Bond Plus Retail lacks in firepower, it makes up in consistency. Investors looking to reduce their interest rate risk may do well to consider it.

The fund may not outperform the market by a huge margin but the risk of underperforming the market is also low here. In the nine months ending September 30, 2004, the fund has outperformed the category average only thrice, indicating that the chances of outperformance are not high. The standard deviation of the fund, though, is 0.07 implying greater consistency in returns. Between October 2003 to September 2004, the average maturity of the fund has moved between 8.5 to 17.76 months.

This suggests that the fund manager has refrained from taking aggressive calls on interest rates. The fund's exposure to AA-rated papers has increased from 22.15 per cent in August 2004 to 25.03 per cent in September 2004. On the face of it this would suggest an increase in credit risk, it has to be seen in context of the outflow seen by the fund. The size of the fund has decreased by 34 per cent in September 2004 from Rs 236.25 crores to Rs 155.95 crores.

The fund is good for investors who are satisfied with average returns and do not want to take large bets on interest rate movements.