Following The Right Principles

IDBI-Principal Income Fund's has achieved less volatility compared to its rivals

Background: Launched in October 2000, IDBI-Principal Income fund comes in three flavours: growth, quarterly dividend and half-yearly dividend options. While there is no entry load, the fund levies an exit charge of 0.5 per cent for redemptions within six months on a sum of upto Rs 10 lakh.

Performance: In its brief history, this fund has consistently outperformed its peers. This performance has been generated with lower volatility. The fund's trailing one-year return of 15.17 per cent as on January 28, 2003, beats its category (13.21 per cent return) hands down. Though IDBI-Principal Income has seen only upbeat bond markets, it deserves credit for its stability. For instance, out of the 25 monthly returns, it has lagged behind its peers only four times. Taking advantage of declining interest rates, the fund turned in a handsome 17.67 per cent return in 2001. Recently, after the bank rate cut in October, the fund gained 2.25 per cent against the 1.8 per cent returns of its peers in November 2002. Overall, the fund was up 16.73 per cent through 2002, which places it among the toppers in the medium-term debt fund category.

 

Portfolio: The IDBI-Principal Income Fund has largely maintained a quality portfolio. Initially in 2001, the fund benefited from a higher corporate bond stake while in 2002, government securities helped boost the fund's returns. The fund has largely stayed clear of lower-rated corporate bonds, which accounted for an average 12 per cent of its portfolio. Over time, this quality-orientation has helped it to be less volatile vis-