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Despite being a short-term debt fund, you have an average maturity of over one year. Aren't you subjecting investors to greater risk?
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| Risk does increase for investors. However, the average maturity has been structured in such a manner that the risk of losing capital for investors reduces if they stay invested in the fund for a month. |
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| Our portfolio maximises returns for investors on a risk-adjusted basis. Moreover, our fund tracks the Crisil Short-Term Index. The index has an average maturity of one year. |
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What should be the time-frame for an investor in the fund?
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| The ideal time period for investment is one to six months. |
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What would be your strategy to maximise returns in the current environment?
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| We will watch the markets in order to maximise our returns. We will not rely on coupon alone to generate returns for the investor. |
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| Most of the short-term securities today have a coupon between 4 to 5 per cent. If the fund expenses are accounted for, this return could fall to 3.5 to 4 per cent. |
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| Therefore, it becomes important for us to track changes in interest rates. We will churn the portfolio accordingly to enhance returns. |
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Over the last one year you seem to have downsized allocation to AA and lower-rated papers, contrary to what most fund managers are trying to do. How do you explain this?
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| The spread between AA- and AAA-rated papers has decreased from 100 basis points to 55 basis points over the last one year. This has made AA-rated papers less attractive on a risk-adjusted basis. |
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| Besides, bonds of companies which may be upgraded are already trading at prices that AAA papers command. Therefore, it does not make much sense to invest in AA papers in the current scenario. |
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If you calculate the returns the fund could generate out of coupon, capital appreciation and trading gains, how much would that be for the next one year?
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| We do not track returns on this basis. |
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