The Gilt fund christened as the Kotak Mahindra KGilt Unit Scheme '98 will invest exclusively in the securities issued by the government of India. ``KGilt has two schemes under its umbrella, the Savings scheme and the Investments scheme. The two schemes are segregated by the maturity profile of the underlying assets,'' according to Shekhar Sathe, chief executive officer, Kotak Mahindra Asset Management Company.

The Savings scheme will have 70 per cent of assets with a maturity period of less than one year, while the Investment plan will have 70 per cent of assets with a maturity period of more than one year. The KGilt savings schemewill target investors comprising corporate treasurers, high net worth individuals and retail investors.

The KGilt Investment scheme will be targeting investors with a longer term investment horizon which would include corporate treasuries, retail investors as well as trusts, pension funds etc. The scheme will also have -- apart from safety -- capital gains with indexation benefit on a relatively risk free investment as the scheme will invest only in government securities.

The equity scheme K30 will invest predominantly in equity and related instruments. The portfolio will generally comprise of equity of not more than 30 companies. ``It is a misconception that debentures and bonds are less volatile than government securities. Unfortunately, fair value of debentures or bonds is often not correctly disclosed. This is due to the lack of liquidity of these instruments and hence the non-availability of market prices. The prices of these debentures and bonds are in fact derived with government securities asbenchmark. This has led to the NAV of many debt funds to be optimistic,'' Sathe said.

``The assets held under KGilt scheme are highly liquid and hence market prices are easily obtainable. Being marked to market, the NAV of this scheme will be there for anyone to see and be transparent. We plan to give our investors innovative and new instruments to invest into and innovation would be our forte," Sathe said.