Birla Gilt Investment is a dedicated Gilt fund launched in November 1999. The fund offers a quarterly dividend plan under which it has paid an aggregate of 12.69%.
The scheme seeks to generate income with investments in government securities with medium-to-long term maturities. With Government Securities as their only investment domain, the fund behaves like a sectoral fund among, debt schemes. Government Securities offer one of the most impeccable credit qualities among debt papers and thus relative safety. But, that also means lower coupon income for the fund.
However, there are other areas where the fund can easily work on to pep up yield. Bonds price, are responsive to changes in interest rates. Gilts with their high level of liquidity, are one of the most sensitive instruments. They react positively to lowering of interest rates and shed value in the event of a fall. This gives scope for funds to manage interest rates actively to augment returns. BGI, targets a medium maturity portfolio and thus does not seek to be an aggressively managed fund.
While the fund has been actively managed, its small size does not seem to have helped it. For even while the fund actively stretched its portfolio maturity in times of a rally, redemptions then seem to have partly diluted the portfolio maturity. Thus the fund has not been able to fully capture the gains at the higher end earlier this year.
With a return since launch at 13.63% the fund has been an average performer. Even while being pitched at the medium end, dedicated Gilt funds are volatile as the best and worst returns suggest. Thus they should be considered only for a medium term horizon.