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LIC Bond Fund

Dhirendra Kumar

LIC Bond is an open-ended intermediate debt fund launched in May 1999. Since its launch, the fund has given five dividends aggregating to 19.5 per cent. LIC Bond is a no-load fund.

Since its launch, the scheme has given an annualised return of 13.83 per cent. A part of the gains of the fund have come on the back of a portfolio, which is predominantly exposed to AA papers – these instruments are lower on credit quality ladder. While this gives the fund higher returns in terms of interest income, it also hampers the liquidity of the portfolio.

FUND BASICS   Objective    Size (Cr)    NAV: 10/05/2001    Exit Price    Entry Price    Total Return   Income   573.00   12.97   12.97   12.97   13.83%

While the AA component went to as high as 55 per cent in February 2000, it has been pruned in recent times. Since then with the steady growth in corpus, the fund has emerged a medium-sized fund. With this the focus has gradually shifted to AAA rated instruments accounts for about 70 per cent of the corpus and AA paper makes up the rest.

BENCHMARK COMPARISONS (%) (04/05/2001)      1M    3M    6M    1Yr    3Yr   Fund   1.67   3.85   7.38   11.63   -   JP Morgan G-Sec Index   2.12   4.50   11.34   12.39   14.65   Obj. Avg.   1.32   3.54   7.78   10.82   12.18

The returns posted by the debt fund depend on the interest rates. As interest rates move down, bond prices move up and so are the returns posted by the fund. This is more pronounced in case of long term instruments. The fund actively managed the portfolio maturity during the volatile markets of 2000. However, the recent maturity is not available for comment. Interestingly the fund has been impervious to the interest rate movements in July 2000. Contrary to the performance of funds in the category, LIC Bond posted a notional gain of 0.03 per cent in July 2000, when the sector posted a loss of 0.25 per cent.

A return since launch of 13.83 per cent reflects the gains that emanated from its medium quality portfolio held earlier on. With its limited disclosure, the fund does not give much room from complete analysis. Further, while the fund has shifted focus on quality with a steady growth in corpus, it remains to be seen if this is sustained in future.

Top Holdings (30/04/2001)      Value (Cr.)    % of Assets   Reliance Industries   46.40   8.10   G S E C S 2002   36.00   6.28   Power Finance Corporation   35.84   6.25   State Bank   25.68   4.48   B P L   25.30   4.42   Reliance Petroleum   25.13   4.39   Tata Chemicals   24.71   4.31   BankofBaroda   22.89   3.99   Indian Oil   20.05   3.50   Nuclear Power Corporation   20.07   3.50   Larsen & Toubro   18.80   3.28   G S E C S 2004   16.31   2.85   Maruti Udyog Ltd   16.28   2.84   Hindustan Petroleum Corpn.   14.08   2.46   I C I C I   13.98   2.44

Source: Value Research

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