The fund uses a mix of relatively low portfolio duration with active investments in higher-yielding corporate bonds. It does not take aggressive duration calls but tries to improve returns by cherry-picking corporate bonds. This is reflected in the fund's returns matching the category and benchmark for five years - at 8.4 per cent - but lagging behind the category during a raging bull market in bonds in the last one year.
The fund has been a consistent but not chart-topping performer in the income category. Despite its bullish view on interest rates, the fund has been conservative with portfolio maturity. Average maturity has been at one-two years consistently over the last five years despite ups and downs of the rate cycle. This strategy has helped the fund avoid high losses during choppy periods for debt markets. In the May-August 2013 quarter of 2013, when many bond funds lost 3-4 per cent in value, this fund got away with a 1.2 per cent fall in its NAV. Returns over the last one year have still been in double digits - at 10.6 per cent.
While the fund is very conservative about taking on rate risks it does take on credit risk to some extent by investing quite actively in AA and lower-rated corporate bonds. But credit risk is managed through stringent credit analysis as well as a bias towards hybrid debt instruments which carry the backing of good business groups. The focus on short-term bonds also substantially reduces the default risk. Overall, it's a good fund for investors who seek regular bond income without undue volatility.
Best Tax Saver Mutual Funds 2016 or ELSS Mutual Funds for 2016
1.ICICI Prudential Tax Plan
2.Reliance Tax Saver (ELSS) Fund
3.HDFC TaxSaver
4.DSP BlackRock Tax Saver Fund
5.Religare Tax Plan
6.Franklin India TaxShield
7.Canara Robeco Equity Tax Saver
8.IDFC Tax Advantage (ELSS) Fund
9.Axis Tax Saver Fund
10.BNP Paribas Long Term Equity Fund
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