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Kothari Pioneer Income Builder

KP Income Builder, perusing a nimble footed strategy, has struck a fine balance between credit quality and high interest income. With this the fund has emerged a steady performer

KP Income Builder, perusing a nimble footed strategy, has struck a fine balance between credit quality and high interest income. With this the fund has emerged an above average performer. The fund has a consistent track record of dividend payout under its annual option of 10%, 12.75%, 12 and 10% in its four years history.

Changing tack with the new manager in helm since March 2000, the fund left conservatism to peruse active management. The focus today is on striking an optimal trade off between safety, liquidity and returns. Bond fund gains in times of a rate cut and vice versa. While the fund has distinctly stretched its portfolio maturity in line with interest rate outlook, it has still been within reasonable limits. Besides, the fund has tried to capture any upside through a cut in rates by switching actively from corporate debentures to gilt instruments. Investment in gilts during interest rate declines offer scope for capital appreciation and trading profits. After been caught on the wrong side during the volatility in July 2000 - as the worst months return suggests, the fund has been right with its interest rate outlook in recent times.

On other occasions, the fund invests in corporate instruments, including AA papers to earn a higher coupon income. Here, the fund actively leverages its extensive research skills on the equity side to avoid any negative surprises on payment ability. The exposure to AAA quality instruments including Gilts accounted for an average 77% of the corpus in the last trailing year, while AA rated bonds were at 19%.

With a medium size aiding a nimble footed strategy, the fund has posted a reasonable return of 13.46 % since launch to emerge a steady performer.