Stability, not aggressive returns, is on offer here. Delivering average return by taking average risk is the way by which Kotak Bond Short-term fund has been managed.
The strength of this cautious approach is that the fund has been one of the least-volatile members of its category. Its expense ratio of 0.87 per cent is also in line with that of the category average.
Kotak Bond Short-term fund doesn't take much of the credit risk as well. AAA-rated corporate bonds form a majority stake in the fund's portfolio (average 60 per cent). Though exposure to below AAA bond has been high at average 20 per cent, but as majority is into IDBI bonds, it's not that risky. Gilts have accounted for under 5 per cent of the fund's total holdings except for Nov-Dec 2003, when it went up to 13 per cent. The fund's average maturity has also remained in a low band of 11-27 months, thus ensuring that the interest rate risk is minimised.
In the past one-year, Kotak Bond Short-term fund's monthly return has beaten its category average half of the time. Those seeking to invest in a diversified mix of bonds without taking on much interest rate risk have a suitable option here.
This article was originally published on December 01, 2004.
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