This fund was launched in 2004, till mid-2008, it had a patchy existence.
Since then, it has done a good job of fulfilling its basic goal of capturing price movements dynamically, without taking excessive risk.
For instance, in 2008-end, when the Reserve Bank of India opened the floodgates of liquidity, funds that increased their maturity sharply to 10 years and above made gains of 10-20 per cent. In the next quarter, most of these funds were caught on the wrong side of the yield curve. However, Dynamic Bond stayed within limits, gaining a healthy 6.4 per cent in December 2008 and managed to stay positive with a return of 1.3 per cent in early 2009. Since then, it has been following the strategy of conservative exploitation of opportunities.
The investment objective of this scheme is to optimise returns by designing a portfolio to dynamically track interest rate movements in the short-term by reducing the duration in a rising rate environment, while increasing it in a falling rate environment. The investment strategy would revolve around structuring the portfolio so as to capture the positive price movements and minimise the impact of adverse ones. To maximise returns and gain maximum value out of securities, the fund managers may look at curve spreads on both the gilt and bond markets.
This fund is a good choice for investors who are looking for a dynamic, yet safety-oriented profile.