Weathering the ups and downs of the market, BIP with massive corpus, offers above average performance.
A good part of the total return of 13.08% came by, thanks to an early edge - the fund was lucky with high coupon corporate instruments for its small size in its initial days. These instruments with a high coupon, boosted returns when interest rate was on a decline. Despite its growing size, the fund stayed largely invested in corporate instruments rather than gilts - thus preferring coupon income to trading profits. Among its corporate picks, the fund has also taken exposure to unrated and AA & below papers. With an allocation as high as 45 % 1999, the fund sought to pick up yield, since AA papers offer higher interest income for a higher degree of risk.
However, amid a growing focus on better credit quality, the fund has gradually embarked on realigning the portfolio in favour of top rated bonds. Today, AAA rated instrument make up for 84% of the corpus. Also, triggered by a steady fall in income from corporate papers, the fund has sought investments in government securities, which are highly liquid and hold good credit quality.
With a conservative stance on credit quality, the fund sought to add returns by active interest risk management. While realigning the portfolio in line with changing interest rate expectations, the fund has turned distinctly bullish, aggressively stretching portfolio maturity to 5.16 years in the current rally. The fund has also given a pep up returns by cutting down on the expenses charged.
Active management has seen this massive sized fund steer towards quality in recent times. With a two-year return at 12.70%, Birla Income Plus, is an above average performer.