Launched in November, 1997, Sundaram Bond Saver could not have had a worse launch. In its brief tenure of less than five months, it had to face a change in interest rates thrice. The interest rates had crashed in October last year and thus, the fund could invest in relatively low yield instruments. By the time it was almost fully invested, the interest rates went up in January, 1998 and the value of its securities dropped. Still, the fund has had a steady start with the latest NAV of Rs 10.20.Sundaram Bond Saver seeks to earn regular income by investing primarily in fixed income securities. The fund can have upto 100 per cent exposure in debt instruments, upto 40 per cent in money market and upto 25 per cent in low risk equity instruments. The possible equity exposure is worrying although the fund currently is not invested in equities. Income funds, in the past, have shown a tendency to go over board with equity investments when the stock market is booming. However, once the market collapses, the funds areleft with junk stocks and huge losses. Any equity exposure drastically changes the risk profile of the fund.
The Rs 9.06 crore Sundaram Bond Saver had a 66 per cent exposure in debt and 34 per cent in cash equivalent as on February 28. According to the fund manager, "The long-term outlook however remains uncertain. The movement of exchange rate will have significant bearing on the money markets. As the exchange rate is still not out of danger, the fund remain cautious in deployment of funds. It continues to invest in short term instruments, where the returns are excellent without undue volatility".
The debt exposure includes eight instruments including Denocil Crop Protection, Reliance Capital, Sak Industries, Fal Industries, Reliance `H' Series, SBI Floating Rate Notes, Gujarat Ambuja Cement and Tisco SPN.
Sundaram Bond Saver carries an exit load of 1 per cent. The minimum subscription is Rs 5000.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
