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IDBI Principal Income Fund outperforms over all periods

Capital Market Bureau

Background: Industrial Development Bank of India (IDBI), one of India's leading financial institutions with an asset base of over Rs. 72,000 crore, joined hands with Principal Financial Group, one of the world's foremost asset management organisations to form IDBI-Principal Asset Management Company. This 50:50 joint venture was set up in November 1994.

IDBI Principal Income Fund is an open-ended Debt-Medium Term scheme. The primary investment objective of the scheme is to generate regular income and capital appreciation through investment in debt and related securities. The scheme is suitable for investors primarily seeking a stable return while enjoying medium to low risk.

The scheme was launched in October 2000. It offers the Growth, Half yearly and Quarterly Dividend options. The initial minimum application amount is Rs. 5000 and thereafter Rs. 500. There is no entry load and there is an exit load of 0.5% if redeemed within 6 months. Binay Chandgothia is the fund manager. The Half-yearly option has declared a dividend of Rs 0.05 per unit in October, while the Quarterly option has declared Rs 0.25 per unit in October 2002.

Portfolio: The net assets of the scheme have slightly increased from Rs 528.11 crore in September to Rs 529.50 crore in October. The exposure to non-convertible debentures (NCDs) has decreased from 44.81% to 39.38%, while commercial paper investment is down from 5.21% to 1.49%. Exposure to call has also decreased from 7% to 1.61%. Exposure to gilts is up from 37.89% to 44.33%. Around 88.57% of the portfolio is invested in AAA/sovereign paper. The fund has increased the maturity of the portfolio from 4.90 years to 6.2 years.

Seven out of the top ten investments are in g-secs. 7.40% GOI 2012 is the highest investment with 10.05% exposure, up from 7.41% in September. Overall the other g-sec investments have also changed in terms of percentage holdings. Exposure to last months top holding 7.55% GOI 2010 is pared from 8.47% to 4.57%. The fund has introduced new entrants in this category: 7.46% GOI 2017 with 7.83% exposure, 8.07% GOI 2017 with 7.10% exposure, and 11.03% GOI 2004 with 0.97% exposure.

The highest NCD investment is the AAA rated Reliance Industries with 6.68% exposure. AAA rated IRFC, which was September’s, top holding in this category stood at 5.42%, down from 6.56%. In commercial paper segment, the fund has exited from ICICI bank and Dabur.

Performance: The scheme has posted consistent above average returns. The performance is positive over all periods just like most schemes in the category and the annualised figures have also overtaken the benchmark SBI deposit rate.

Over one year ended 31 October 2002, the Growth option has posted 14.61% as compared to the category average of 12.06%. The topper over one year was Cancigo with 21.12% returns. Since inception, the scheme posted 16.31% returns while the category average stood at 13.03%.

Over six months, the scheme posted 6.55% returns overtaking the category average of 5.42%. Its annualized returns of 13.28% were more than double the 6 months SBI deposit rate of 6.50%.

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