With a focus on generating regular returns, the fund has structured its medium sized corpus around a quality portfolio. A no load fund, the fund has paid out dividends approximating to 12%, 9.1%, 10.2% and 9% in its four years of existence in varying frequency.
Since launch, the fund has focussed on credit quality with an average 88 % exposure to AAA bonds. This is consistent with its strategy of limiting risk, for these instruments are high on credit quality. With a steadily growing corpus, the fund was also one of the first to park money in government securities in 1998. Being highly liquid, Gilts also come in handy to manage the redemption pressures of its large big-ticket investor base. However, the high quality focus limits the coupon interest earned by these instruments. The fund sought to partly offset this with AA exposure - which has been capped at around 10 per cent.
Interest risk management is the other strategy the fund actively pursues. As bonds lose value when interest rates go up, AAA portfolio is more susceptible to volatility. However, instruments with a lower maturity are better insulated from interest rate gyration. With a nimble footed strategy the fund has aligned the portfolio maturity with interest rate outlook. For instance, while the fund held a maturity to 2.12 years in July when rates were hiked, it has repositioned it to an aggressive 5.91 years to capture the gains from the current rally.
With an active management coupled with an quality conscious management, the fund has posted a reasonable return of 12.85 % since launch. This is consistent with the philosophy of safety of capital over returns.