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Sundaram Bond Saver

Dhirendra Kumar

Sundaram Bond Saver, a medium term debt fund, was launched November 1997. While entry and exit is at NAV, the fund charges a load of 0.5% for redemption within 6 months. The fund has maintained regular dividend payout of 7%, 12.5% and 12.5% in 1998, 1999 and 2000, respectively. In the current calendar, the fund has paid 2 dividends of 2.5% each.

Returns from bond funds are linked to interest rates. Bonds rally in the event of a fall in interest rates and vice versa, with longer dated papers more sensitive to interest rate movements. The fund has largely been conservative in handling interest rate risk – not stretching its maturity too far in times of a rally, and restricting investments to a lower maturity spectrum in uncertain times.

FUND BASICS   Objective    Size (Cr)    NAV: 12/04/2001    Exit Price    Entry Price    Total Return   Income   358.75   15.11   15.11   15.11   12.92%

At the same time, the fund has actively sought to capture any upside with softening interest rates by actively realigning across instruments. For instance, at the time of the rate cut in April 2000, the fund had about a half of its corpus in gilts, which offer the maximum scope for capital appreciation and trading profits. The relatively stable yet small corpus has only aided the fund’s strategy.

Benchmark Comparisons (%)      1M    3M    6M    1Yr    3Yr   Fund   0.20   3.87   8.05   11.66   13.68   I-Bex Tot.   -0.31   5.03   10.29   13.39   14.10   Obj. Avg.   0.37   3.80   7.41   11.05   12.10

The fund has maintained an average 84% exposure to triple A paper in 2000 – Gilts, Cash and corporate bonds. Besides seeking trading profits from AAA rated instruments, the fund has retained an average 14.35% exposure to double A and un-rated papers in the last calendar. These instruments tend to pay higher interest income and also offer capital appreciation in the event of credit upgradation.

The focus on earning regular income by changing tack with interest rate outlook has helped the fund post a reasonable return of 12.92 % since launch. For the two years ended April 12, 2001 the fund has yielded 13.50% against a category average of 12.17% over the same term. Aided by a medium sized corpus and active portfolio management, the fund has moved to the top quartile in its league.

   

Top Holdings (30/03/2001)      Value (Cr.)    % of Assets   G O I   59.50   16.59   IDBI   22.03   6.13   Hindalco Ind.   20.72   5.77   Reliance Ind.   20.09   5.60   I C I C I   18.00   5.02   HDFC   15.35   4.28   Mahindra & Mahindra   15.22   4.25   G E Capital Services   13.04   3.63   Inox Air Products   10.24   2.85   Kotak Mahindra Primus   10.12   2.82   Tata Power Co.   10.00   2.79   HPCL   10.00   2.79   Panacea Biotec   9.87   2.75   Whirlpool Of India   9.66   2.69   Reliance Capital   5.94   1.65

Source: Value Research

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