Background: K-Gilt Investment Plan, India's first gilt fund, was launched in December 1998. The fund seeks to generate steady returns through a portfolio of government securities (G-Secs).
The minimum investment is pegged at Rs 5,000 and the fund does not levy an entry or exit load or a contingent deferred sales charge.
Performance: K-Gilt's annual performance places it in the third quartile of its category while its risk-adjusted returns land it in the second quartile.
The fund's performance is backed by an astute interest rate risk management policy. It hasn't stretched its average maturity far above that of the category.
Medium to long-term G-Secs have had a roller-coaster ride in 2003. The fund came up with an average performance in early January, 2003, when interest rates rose sharply. It has retained the performance since then though interest rates have been falling.
Portfolio: The fund's policy of investing in sovereign instruments renders its portfolio free of credit risk. However, sovereign instruments are susceptible to interest rate changes as they are traded more actively.
This calls for deft interest rate risk management. During late-January to mid-February, when yields rose 0.89 per cent, the fund's average maturity was reduced from 11.9 years to 8.35 years
