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| Principal Income has outperformed its peers every quarter since its launch
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| Background: Launched in October 2000, Principal Income (erstwhile IDBI Principal Income) comes in three flavours: growth, quarterly dividend and half-yearly dividend options.
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| While there is no entry load, the fund levies an exit charge of 0.5 per cent for redemption within six months on a sum of upto Rs 10 lakh.
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| Performance: In its brief history, the fund has consistently outperformed its peers. This performance has been generated with lower volatility. The fund's trailing one-year return of 13.55 per cent, as on August 5, 2003, beats the category (11.80 per cent) hands down.
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| Moreover, Principal Income deserves credit for its stability. For instance, during the volatile first quarter of 2003, the fund suffered the least.
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| In fact, the fund has outperformed its peers every quarter since its launch. Taking advantage of the declining interest rates, the fund turned in 17.67 per cent returns in 2001 and another 16.73 per cent in 2002.
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| In 2003, the fund's year-to-date returns of 4.57 per cent place it in the top quartile of the medium-term debt fund category as on August 5, 2003.
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| Portfolio: In 2001, the fund benefited from higher corporate bond stakes while in 2002 government securities helped it boost returns. It has largely stayed clear of lower-rated corporate bonds, which have accounted for an average 12 per cent of its portfolio.
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| Though the fund was launched before the bull-run, it maintained relatively shorter portfolio maturity in comparison to its peers through 2001.
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| However, three rate cuts in the year helped the fund deliver good returns. In the October 2002 rate cut, the fund increased its average maturity to 6.2 years.
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| Since then, owing to a continuous fall in yields, Principal Income has maintained a higher gilt exposure (nearly 47 per cent).
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| However, witnessing the recent volatile first quarter, the fund has kept the average maturity in the lower side of the category. Its current average maturity is 5.5 years, as on July 31, 2003.
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The fund
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