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JM G-Sec Regular

Dhirendra Kumar

JM G-Sec Regular Fund seeks to provide safety to investors through its investment exclusively in sovereign securities or gilts. This plan is for investors with a medium to long-term investment horizon. A no-load fund, it is available with a minimum investment of Rs 5,000.

Launched in September 1999, the fund has been a blockbuster in its brief tenure. With no credit quality and liquidity issues, the fund has been aggressive with its strategy -- portfolio positions based on rate outlook.

FUND BASICS   Objective    Size (Cr)    NAV: 28/05/2001    Exit Price    Entry Price    Total Return   Gilt-Medium-Term   38.88   13.12   13.12   13.12   17.75%

Bond prices respond to changes in interest rate outlook. A fall in interest rate boosts the bond prices and vice versa. The gain or loss in sharper for bonds with long maturity and gilt prices reflect this quickly. This explains the higher volatility in gilts against corporate bonds.

BENCHMARK COMPARISONS (%) (25/05/2001)      1M    3M    6M    1Yr    3Yr   Fund   2.03   4.13   12.42   17.97   -   JP Morgan G-sec Index   2.08   4.01   12.12   14.33   15.39   Obj. Avg.   1.81   3.75   10.13   13.80   -

The maturity profile of JM G-Sec Regular Fund was not made available till recently. But the high returns suggest that the fund has maintained a portfolio of long maturity. The fund has successfully guarded the downside too. The fund posted positive gains in July 2000 when interest rates went up when most other funds were posting negative returns in May to July 2000. The fund’s aggressive strategy has worked, boosting its returns in a volatile market. The fund has also been quick to realign its portfolio maturity in a steady market. Currently, with the portfolio maturity at 13 years, the fund is well positioned to capture the gains from the current rally. Today, the fund is even more aggressive compared to its variant for institutional investors – JM G-Sec (PF), which has a currently average maturity of 10.41 years.

JM G-Sec Regular Fund may have yielded exceptional returns with 17.75 per cent return since launch but this return is for a brief period and based on a very aggressive portfolio. The strength of the fund – aggressive calls based on rate outlook, can also be its biggest vulnerability.

Top Holdings (30/04/2001)      Value (Cr)    % of Assets   GOI 2015 11.43   12.90   33.17   GOI 2011 11.5   7.07   18.19   GOI 2011 10.95   5.24   13.49   GOI 2020 11.6   3.23   8.30   GOI 2016 10.71   2.04   5.26   GOI 2008 11.4   1.77   4.55

Source: Value Research

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