markettrend766
15-11-2009, 12:41 PM
The volatility in bond prices over the past two years has proved that debt funds require active management and a sense of timing on the part of the investor, not very different from equity funds. If interest rates are upward bound, investors need to switch out of longer-tenure income funds to short-term funds, to avoid losses from falling bond prices.
Similarly, easy liquidity conditions may call for shifting your money from liquid funds to short-term debt funds. For investors who cannot actively manage their debt portfolios (and that description would fit most of us!), Birla Sun Life Dynamic Bond Fund is a good option.
The fund, positioned neither as a long-term bond fund nor as a short-term one, promises to actively manage the tenure and composition of securities in its portfolio to suit changing debt market conditions. The fund has been deftly managed, delivering a 12.3 per cent return over a year, and figuring within the top quartile of debt funds over three- and five-year time-frames.
A run-through of the Birla Dynamic Bond Fund’s portfolio over the past year shows that it has juggled tenors and assets quite nimbly in what was a challenging year for debt managers. The bond markets have been on a roller-coaster in this period, with the price rally in late 2008 giving way to a sudden about-turn in rates and falling prices from January 2009.
The Dynamic Bond Fund managed this change well. The fund featured a relatively short tenor of about 2.7 years by end 2008, which protected it to some extent from falling bond prices. Portfolios late last year and early 2009 were also quite defensive, with a high exposure to money market instruments and PSU bonds.
With bond yields turning range-bound since March 2009, the fund gradually stepped up its allocation to corporate debentures with this exposure nearly trebling from 13 per cent to over 38 per cent between March and October. That enabled the fund to capitalise on the compressing spreads between corporate bonds and gilts, aiding its NAV.
It is worth mentioning that the fund has managed a reasonable show without taking aggressive calls either on interest rates (its average maturity has hovered between 1 and 2.5 years) or credit risk (portfolio is largely triple A rated).
In terms of performance, the one-year return of about 12.3 per cent makes it a middle-of-the-roader. However, returns of 10.5 per cent (annualised) over three years and 8.5 per cent over five years, place it among the top performers in the debt category. The fund has comfortably beaten its category average over all of these terms.
Similarly, easy liquidity conditions may call for shifting your money from liquid funds to short-term debt funds. For investors who cannot actively manage their debt portfolios (and that description would fit most of us!), Birla Sun Life Dynamic Bond Fund is a good option.
The fund, positioned neither as a long-term bond fund nor as a short-term one, promises to actively manage the tenure and composition of securities in its portfolio to suit changing debt market conditions. The fund has been deftly managed, delivering a 12.3 per cent return over a year, and figuring within the top quartile of debt funds over three- and five-year time-frames.
A run-through of the Birla Dynamic Bond Fund’s portfolio over the past year shows that it has juggled tenors and assets quite nimbly in what was a challenging year for debt managers. The bond markets have been on a roller-coaster in this period, with the price rally in late 2008 giving way to a sudden about-turn in rates and falling prices from January 2009.
The Dynamic Bond Fund managed this change well. The fund featured a relatively short tenor of about 2.7 years by end 2008, which protected it to some extent from falling bond prices. Portfolios late last year and early 2009 were also quite defensive, with a high exposure to money market instruments and PSU bonds.
With bond yields turning range-bound since March 2009, the fund gradually stepped up its allocation to corporate debentures with this exposure nearly trebling from 13 per cent to over 38 per cent between March and October. That enabled the fund to capitalise on the compressing spreads between corporate bonds and gilts, aiding its NAV.
It is worth mentioning that the fund has managed a reasonable show without taking aggressive calls either on interest rates (its average maturity has hovered between 1 and 2.5 years) or credit risk (portfolio is largely triple A rated).
In terms of performance, the one-year return of about 12.3 per cent makes it a middle-of-the-roader. However, returns of 10.5 per cent (annualised) over three years and 8.5 per cent over five years, place it among the top performers in the debt category. The fund has comfortably beaten its category average over all of these terms.