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Dundee Bond PSU Fund

Do not be carried away from by the return since launch of 13..76%, for that's a reflection of early gains made by the fund. Today the fund is way off that sterling performance, to emerge a below average performer

Do not be carried away from by the return since launch of 13..76%, for that's a reflection of early gains made by the fund. Today the fund is way off that sterling performance, to emerge a below average performer.

Dundee Bond PSU seeks predominant investment in debt issues of public sector enterprises and public financial institutions in the range of 80-100%. The fund employs an interest rate anticipation strategy where the fund manager monitors related factors to forecast interest rates.

With this narrow investment objective and a rather miniscule corpus, the fund stayed focused on a Quality, with the portfolio largely comprising of AAA rated instruments. The fund also has stakes in Coal India Limited which has been recently downgraded to AA rating. With this the fund bets on safety even if it comes at the cost of a lower coupon income.

The fund sought to actively manage interest rate risk instead. With an active interest rate forecasting style the fund stretched its maturity in early 2000 when interest rates were cut. This worked in the fund's favour for when rates are cut longer dated papers tend to gain the most. With this the fund gained an impressive 6.95 in the first quarter of 2000 alone. In the ensuing bear markets too the fund deftly pruned its maturity to check any fall in NAV. The fund continued with conservatism when the the markets recovered in October 2000. With a lower maturity portfolio at less than 2 years, the fund failed to capture the rally at the higher end of the maturity spectrum. The small size of the fund has limited its ability to tarsant in market lots says Fund Manager Akilesh Gupta.

At a one-year return of 10.03 this paltry sized fund is still lagging behind its category average at 10.74%.