BIRLA SUN LIFE DYNAMIC BOND
Birla Sun Life Dynamic Bond has been around since September 2004 and since its launch, it has maintained a record of positive returns in each and every quarter. Its three-year annualised returns (ended August 31), stands at 9.98 per cent, 289 basis points ahead of the category average. At its worst, the fund has given a yearly return (June 8, 2005 - June 8, 2006) of 4.54 per cent, still better than quite a few of its peers.
The fund attempts to maintain a highly liquid portfolio. The manager, Maneesh Dangi, achieves this by maintaining a diversified portfolio of different maturities. Over the years, the fund managers have varied the portfolio maturity with the prevailing interest rates. In the past year, Dangi has kept the average maturity at 1.32 years. The fund manager generally populates the portfolio with certificates of deposit (CDs) and debentures issued by financial companies. Currently, the portfolio’s exposure to financial companies is at 69.03 per cent.
But such an impressive performance comes at a cost; the fund’s expenses have been on the higher side. Though it has gone as low as 0.15 per cent, it has also gone up as high as 1.58 per cent. Currently, it is one per cent.
Overall, a definite winner.
CANARA ROBECCO INCOME
Under Jain, the fund has made a complete turnaround. Both the assets and the fund’s performance have taken a turn for the better. In 2008, the fund was the best in its category, with a return of 29.95 per cent (category average, 13.92 per cent). In 2009, it was fifth in terms of performance. So far this year, the fund has matched its category’s return of 3.69 per cent (as on September 30).
This average performance could be attributed to its bet on longer maturity paper, while the category is going the other way on rate cut expectations. Since May, the fund has gone for longer tenure debt, while the rest of the funds in the category are going the other way. From 2.99 years in April, it has gone up to 12.82 years in July. Currently, it is at 9.39 years (as of August).
Unlike many, the fund has actively invested in more volatile GoI bonds. At the end of August, it had a 41 per cent exposure to GOI securities and another 32 per cent to debentures, issued by financial companies. It has at times invested in papers issued by telecom and automobile companies as well.
On expenses, the fund is not the cheapest in its category. Till June, it had disclosed that its expense ratio was 1.89 per cent, 33 basis points higher than the category average.
DSPBR STRATEGIC BOND FUND INSTITUTIONAL
A defensive portfolio of lower maturity securities, coupled with an expense ratio amongst the lowest in its category, makes it quite a decent pick.
Historically, since launch in May 2007, the fund has been an average performer. The run on mutual funds in 2008 took its toll. That year turned out to be particularly bad, since its assets under management (AUM) shrunk by a whopping 89 per cent. It ended the year with negative returns, of minus 4.12 per cent.
In 2009, the fund did manage to generate positive returns (4.52 per cent), but was still below the category average. However, worth noting is that the reason for the fund’s poor performances in the past two years has been its defensive strategy. The fund varies its maturity according to market situations, to generate higher returns. In the past few years or so, it has kept its portfolio maturity on the lower side, due to low policy rate and expectations of a rise in it. The average maturity of the fund over the past year has been near 2.75 months. This strategy has hurt the fund dearly.
On the portfolio front, the fund invests around 90 per cent of its assets in paper issued by banks and financial companies. Though it invests primarily in the highest rated papers, investing almost all of its assets in only one sector (financial services) exposes the fund to sector-specific risks. Among the instruments, it mainly buys shorter tenure papers like commercial paper (CP) and certificates of deposit (CD)
As on August 31, the fund had 91 per cent invested in CDs, with the balance largely in CP and GOI Securities (G-Secs).
Returns data as on 12th September 2010