Birla Sun Life Medium Term

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We like this fund for its impressive, consistent and stable returns. The fund optimises returns by keeping its portfolio maturity duration between 1 and 5 years, with the average maturity never crossing 2.5 years.

 

Strategy
This fund invests a good proportion of its portfolio in instruments outside the top investment grade category. That means it can take exposure to other than AAA-rated instruments to improve the returns; an approach that does post liquidity risk but is managed with the collateral. However, allocation to structured obligations are fully covered for. The fund manager also holds instruments to maturity to reduce interest rate risk, resulting in high yield which is not impacted by the interest rate change.

 

The fund's average maturity has not crossed 2.5 years and currently it is less than one year. Since its launch, this fund has not found an opportunity to increase its portfolio maturity even to its permissible ceiling of 5 years. The fund manager also intends to reduce the interest rate risk by limiting the universe to investments with lower tenure, as longer tenure instruments tend to suffer from higher price volatility even if interest rate moves are marginal.

In March 2012, the fund revised its exit load on withdrawals made within two years of investments, compared to the 3-month period that prevailed till April 2012. The fund levies 2.5 per cent exit load if investors sell units within six months of purchase, with the load gradually coming down to zero if investments are sold after two years.

 

Performance
In its short history of less than 3 years, this fund has impressive superior performance. It posted higher returns than the category average in the past two years to be one of the top performing funds. In the past 15 quarters, this fund has underperformed the category average on only 3 occasions to be a top quartile fund for the past two years. The change in exit load also witnessed a changed strategy to take exposure to slightly risky debt instruments. The higher exit load has also impacted the fund's size, which has come down to Rs 352.5 crore, as on September 30, 2012.

 

Why invest?
This is a high yield fixed income fund, which is not duly impacted by interest rate change. The fund manager addresses risk with quality collateral. The high expense ratio, over a two-year period, is justified

Happy Investing!!

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Invest in Tax Saving Mutual Funds ( ELSS Mutual Funds ) to upto Rs 1 lakh and Save tax under Section 80C.

Invest Tax Saving Mutual Funds Online

Tax Saving Mutual Funds Online

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Download Tax Saving Mutual Fund Applications

These Application Forms can be used for buying regular mutual funds also

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