High quality bond
K Bond Deposit is a medium term debt from Kotak Mahindra Mutual Fund. While entry in to the fund is at NAV, redemption up to Rs 5 lakhs with in 3 months face a load of 0.5 per cent. The fund has paid five dividends aggregating to 15.44 per cent in all.
The fund offers loyalty premium of 0.25 per cent, 0.60 per cent and 1 per cent (of the exit NAV) to investors who stay with the fund for 1-2 years, 2-3 years and over 3 years, respectively.
K Bond Deposit, with its medium-sized corpus, has handled both credit and liquidity risks by largely parking in triple A-rated papers.
This focus has only sharpened over time with quality papers accounting for an average 84 per cent of the corpus.
Nevertheless, the fund has also shopped in AA and un-rated papers for the rest of its corpus, with an eye to pick up yield. Interest risk management calls for altering the portfolio maturity in line with the outlook.
For bonds gain value with a lowering of interest rates, and vice versa. Launched at a time when the debt markets were heading for a rally, the fund started off with a longer maturity portfolio, which was subsequently realigned with a hike in interest rates in July 2000.
Despite active management, the fund shed 0.73 per cent in the volatile markets of July 2000 against the category loss of 0.25 per cent.
However, resurrecting itself since October, K Bond has gained impressively with active interest risk management.
On the back of a medium-sized corpus, the fund has turned in a category topping performance, albeit with some aggression.
In the last six months the fund has yielded 9.56 per cent against the category average of 8.59 per cent.
With a medium sized corpus at Rs 392 crores, K Bond Deposit is well positioned to pursue a nimble footed strategy.
In recent times, the fund has taken the right call on interest risk to post an impressive return 13.65 per cent. If this strategy is sustained, it could emerge among the top quartile.
