Kotak Corporate Bond Fund

 The scheme seeks to generate income largely through a focus on investments in corporate debt securities.

 

Indian investors often like to invest in corporate FDs for higher returns. But some of these FDs can be quite risky. Kotak Corporate Bond Fund allows investors to acquire a diversified exposure to corporate bonds from different sectors such as NBFCs, banks and manufacturing, while also selecting companies of high credit quality.

The fund has been a consistent but middle-of-the-road performer in the income-fund category. Both five- and seven-year returns beat the category but by a thin margin. The fund has distinguished itself in its category through good risk containment, both on the credit and duration side, in volatile debt markets. Due to moderate maturity, it suffered lower losses than many peers during the sudden spike in interest rates in May-August 2013. It manages the concentration risk by sticking to not just individual security caps but also in-house sector caps in its portfolio.

The average duration of the portfolio has generally ranged between 4.5 and eight years. Given that it holds a bullish view on bond prices, the average maturity of the portfolio has risen from 4.5 to eight years in the last one year to March 2015.

With a largely AAA portfolio, the fund suffers from minimal credit risk. But given that AAA corporate bonds are likely to offer muted returns, this fund is not for investors keen to take aggressive corporate bond bets for a high yield.

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