This fund won't deliver chart-topping returns. However, over the long run it will not disappoint and end up beating the category average
The fund has seen numerous changes at the helm. When Katare took over in October 2007, he made dramatic alterations to the portfolio. On the equity side, he increased the number of stocks to 11 (November) from 2 (September). On the debt side, he added Certificates of Deposit (CDs), while earlier Treasury Bills (T-Bills) and cash accounted for 88 per cent (September 2007) of the portfolio. In November 2007 he exited T-Bills for good. The results impressed. In the last quarter of 2007, it delivered 12.83 per cent (category average: 6.12%).
In 2008, the first quarter performance was nothing short of impressive, a return of 9.93 per cent (category average: -3.97%). While other players increased their portfolio maturity, Katare maintained a low maturity profile. While the average maturity of the category was 2.81 years that quarter, the fund's was less than a month. Equity allocation was swiftly lowered. In fact, the last five months saw an equity allocation averaging 5.17 per cent.
Katare is an opportunist who moves swiftly. His equity allocation fluctuates substantially, and so does the number of stocks. There have been times when he lowered equity exposure to a minuscule 1 per cent (November 2008), while at other times it has almost touched the mandated 20 per cent limit. To his credit, he has never crossed the limit. And when he sees Futures trading at a discount, he dabbles in derivatives.
By and large, the fund has a conservative approach regarding the maturity profile of its debt portfolio. In recent times, it has rarely gone above 2 years while in its entire history, it has never crossed 6 years. In December 2008, the average maturity of the fund was 1.35 years while the peer average was 3.34 years.
This fund has seen some aggressive cash bets. In 2008, 81 per cent of its portfolio was allocated to cash in February. Similar moves were seen in February 2007 (63.92%) and November 2007 (69.88%). In May 2010, the fund held 32.71 per cent in cash.
Apart from a few months in 2007, the fund has been consistent in dividend payments. Our grouse is with its expenses which have been consistently high.
