Short-term Gilt Funds: Superior Returns

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: changes in comparison to corporate bonds, which most short-term debt and cash funds invest in. However, these funds are more volatile than cash funds, which have a standard deviation in the range of 0.01-0.04.

Despite turning in superior returns, gilt funds are yet to catch retail investors’ interest in a big way. To increase retail participation, key stock exchanges had kicked off trading in gilts-almost similar to stock trading. Professional management, diversification and, above all, ease of investing, however, makes gilt funds an attractive pick. Nevertheless, short-term gilt funds have been losing out to short-term debt funds. In 2002, 20 short-term debt funds were launched and together these funds now manage around Rs 6,000 crore worth of assets. On the other hand, 15 short-term gilt funds have assets worth just Rs 140 crore under management, as on March 31, 2003. A small size makes these funds to hold a concentrated portfolio that is spread across just 4-5 gilt instruments.

For short-term investors, the following short-term gilt funds could be worth a look.

K-Gilt Savings Plan
This eldest member of the category has posted a decent 9.85 per cent since its launch. With net assets around Rs 15 crore, the fund has a reasonably diversified portfolio spread across gilts and T-bills. This fund is among the top five short-term gilt funds with highest sharpe ratio, thereby indicating superior risk-adjusted performance over the past one-and-a-half years. This is also indicated by its below average risk and average return profile also.