Preserving returns

FUND PICK: JM Short-term Fund

JM Short-term Fund is known for consistency, low volatility and below-average expenses.

Background: JM Short-term Fund was launched in June 2002. It does not charge any entry or exit load. The minimum investment in the fund is Rs 5,000.

Performance: Preserving returns is as important as generating them and the fund has ensured this so far. In the past one year, it has under-performed its category average in only one month.

Its worst three-month return of 0.68 per cent (annualised 2.7 per cent) provides enough proof of its stability. Even its seven-day rolling return stands at 0.13 per cent, which makes it number two in a category of 24 funds. For the past one year it has remained a four-star fund. It has managed this by delivering above-average returns with below average risk.

Portfolio: Active duration management has been the key to the fund's consistent performance. For example, in April 2005 the fund gained 0.73 per cent vis-à-vis category average return of 0.48 per cent as it raised its maturity to 13.8 months in April against the category average of over eight months.

This extraordinary performance can be attributed to the fund's high exposure to below-AAA papers, which touch a high of 59 per cent in April 2005. But the fund has brought this down to a low of 11.31 per cent in June 2005.

The fund has always focused on a quality portfolio. Its average AAA exposure has been 38.65 per cent, with nearly 31 per cent allocation to cash and equivalents in the past one year. The fund has not invested in gilts since December 2004. 
 

Top holdings
As on June 30, 2005	Value  (Cr)	Net Assets (%)
Bajaj Hindusthan	10.00	5.31
Bharat Overseas Bank	14.16	7.51
Citicorp Finance	5.00	2.65
Grasim Industries	4.96	2.63
HDFC	1.99	1.06
Hindusthan National Glass & Inds.	10.00	5.31
IDBI (Term Deposits)	15.00	7.96
IDBI (NCD)	6.26	3.32
Industrial Development Finance	3.88	2.06
J&K Bank	14.17	7.51
Karnataka Bank	4.79	2.54
Kotak Mahindra Investments	5.00	2.65
LIC Housing Fin.	4.98	2.64
Mahindra & Mahindra Finance	5.01	2.65
Nicholas Piramal India	1.00	0.53
Oscar Investments	10.07	5.34
Power Finance Corp.	5.19	2.75
Punjab National Bank	10.00	5.30
UCO Bank	13.26	7.04
Union Bank of India	8.00	4.24
Tata Tea	9.85	2.09
Madras Cements	9.26	1.97

Outlook: The fund has been one of the top-performing schemes, thanks to its consistency, low volatility and below-average expenses.

Low minimum investment of Rs 5,000 adds to its charm.

"� Value Research

Returns in % as on July 14, 2005

Monthly income plans (MIPs) led the way with one-year returns of 10.13 per cent in the debt fund category. 
 

Debt funds Average category returns (%)
	1 month	1 year
Monthly income plans	0.98	10.13
Liquid funds	0.45	5.42
Floating rate funds	0.44	5.1
Debt - medium term	0.18	3.7
Gilt - short term	0.31	3.64
Income	0.3	2.25
Gilt - long term	-0.21	1.9

They were the top performers for the past month also, with returns for the period amounting to 0.98 per cent. 
 

Leaders Monthly income plans
	1 month	1 year
HDFC MIP - LTP	1.17	14.8
UTI - MIS - Adv Fund	1.57	13.13
Birla MIP II - Wealth 25	1.27	13.1
Reliance MIP	2.76	12.75
Kotak Income Plus	1.5	12.31
PRINCIPAL M I P Plus	0.84	12.3
FT India MIP - Plan A	1.14	12.28
FT India MIP - Plan B	1.14	12.28
HDFC MIP - STP	0.86	11.98
DSP ML Savings Pl - Ag	0.89	11.55

Liquid funds and floating-rate funds were the next best performers, while long-term gilt funds suffered the most with monthly returns in the negative territory. 
 

Laggards Monthly income plans
	1 month	1 year
UTI Monthly Income	0.68	5.28
ING Vysya MIP - Plan A	0.39	5.38
Birla MIP II - Savings 5	0.51	5.6
DSP ML Savings Pl-Cons.	0.5	6.1
HSBC MIP - Regular Plan	0.39	7.29
ING Vysya MIP - Plan B	0.63	7.41
Deutsche MIP Fund - Plan B	0.64	8.08
Tata Monthly Income Fund	0.93	8.49
PRINCIPAL M I P	0.58	8.72
Birla MIP	0.93	8.84
Source: www.mutualfundsindia.com

The higher allocation to equities helped MIPs. HDFC MIP - long-term plan was the best fund in the category with one-year returns of 14.80 per cent, while even Birla MIP, which lies at the bottom of the pile, managed 8.84 per cent annual returns.