``The purpose of segmenting is to ensure better service for investors and improved returns. It's a bond fund with a difference,'' says Shekhar Sathe, chief executive officer, Kotak mahindra Asset Management Company Limited.

Called the K-Bond, the fund has two plans -- K-Bond Deposit and K-Bond Wholesale. K-Bond Deposit targets the retail investors with a minimum entry of Rs 10,000 and multiples of Rs 1000 thereafter.

Unlike other funds, the K-Bond will allow exit at a premium for investors who remain invested for a certain period of time. Investors exiting after one year will get a premium of 0.25 per cent in addition to NAV-based redemption. Those staying longer will get a higher premium -- 0.60 per cent for two years and one per cent for three years.

``More, the premium will come from the AMC and we will not dip into the funds of the remaining investors,'' adds Sathe.

For the wholesale investor too there will be no exit load, if he/she gives a 15-day notice for redemption. ``This feature helps the fund meet liquidity and also manage a better yield, ultimately helping the investors,'' explains Sathe. Since there will be large investors and relatively fewer in number it will be possible for the fund to service them to bring down the servicing cost. ``We should be able to keep the costs to around one to 1.5 per cent,'' he adds.

In the balanced fund, the portfolio will be in the ratio of 51:49 for equity and debt. Called K-Balanced, it will be eligible for tax-free dividend, being an open-ended fund with over 51 per cent invested in equity.

Kotak Mahindra Mutual Fund has already filed the draft prospectuses with the Securities and Exchange Board of India.

Kotak Mahindra AMC was the first to launch a gilt fund -- K-Gilt. The fund has provided remarkable returns backed by security for investors as the money is invested in government securities. K-Gilt's Investment plan has given a return of 13.14 per cent since January 5, 1999, while the savings plan has given a return of 11.01 per cent during this period. Kotak Mahindra has another equity fund invested in 30 scrips called K-30, which has given a return of 31.17 per cent over the last six months.