Launched in 2003, the fund did extremely well in 2004. It could not sustain its noticeable performance over the next two years since it refused to take undue risks in the equity market while its peers dabbled heavily in mid- and small-caps.
The average equity allocation over the past six months has averaged 15.46 per cent. Though it has a mandate to invest up to 20 per cent in equity, it is cautious in doing so.Moreover, the investment universe is restricted to the top 100 companies by market capitalisation. So while returns may be compromised, the large-cap equity portfolio is liquid with lower volatility.
While quality has always been the watchword on the debt portfolio, it now has begun to take some risks here. Mid-2004, the fund began to introduce lower rated paper (below AAA) to boost returns. This has now reached a fairly sizeable amount. Since January last year, the allocation to lower-rated paper has averaged at 27.89 per cent every month. In four months of 2006, the average credit rating has been low at AA.
Though it started with a gilt-heavy portfolio, that is no longer the case. Floating rate instruments now dominate. In the past six months, they have averaged at 69.39 per cent. Stability, rather than flashy returns, is what investors look for in monthly income plans. And this fund caters to this very need. Conservative investors would like this offering since the fund sticks to its large-cap stock mandate and does not get swayed by market sentiment and trends. Its standard deviation (a measure of risk), at 0.48, is lower than that of its peers.
Worth noting though, is its expense ratio which is on the higher side at 2.01 per cent.