With a nimble footed strategy, the fund has struck a fine balance between credit quality and interest income, to emerge an above average performer. KPIB has a consistent track record of dividend payout under its annual option of 10%, 12.75%, 12 and 10% in its four-year tenure.
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. With bonds gaining in times of a rate cut, the fund has distinctly stretched its portfolio maturity in times of a rally, while still being within reasonable limits. Further, the fund has tried to capture any upside through a rate cut by switching actively from corporate debentures to gilt instruments. Gilts offer scope for capital appreciation and trading profits during interest rate declines. While being 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 since.
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.
With a medium size aiding a nimble footed strategy, With a return two-year return at 13.71 % the fund emerges a steady performer.