The Hindu Business Line : Speciality debt funds belie hopes

SPECIALITY debt funds, which were sought to be positioned differently, courtesy tags like `dynamic' and `flexible', have mostly turned out a pedestrian performance, the nimble investment strategies followed by some of them notwithstanding.

The funds, many of which were launched in the last two years, have provided negative returns over the past six months or so, much to the disappointment of those who had come into the schemes.

According to one estimate, schemes in the speciality debt category currently manage over Rs 1,500 crore.

The biggest of the lot, Grindlays Dynamic Bond (which had around Rs 725 crore at the end of last month) has given a negative 1.35 per cent over the past six months ended October 31, while the three-month score was minus 0.71 per cent.

Value Research, which has listed 15 schemes in this category, has worked out the average six-and three-month returns at minus 2.11 per cent and 0.25 per cent respectively.

The funds in its list include those managed by the likes of Birla Sun Life, Prudential ICICI, Sundaram and SBI.

Some of the more conspicuous products are Sundaram Income Plus, Birla Dynamic Bond and Prudential ICICI Flexible Income.

The situation, fund management circles say, may be seen in the context of the performance that debt funds have generally recorded in the recent past. The schemes in question have mostly invested in a mix of gilts and corporate bonds - which has not really helped their portfolios.

Returns have stayed under pressure, which have already prompted a section of investors to turn away from these products.

Investors have apparently noticed that many of the schemes have not been able to outscore the benchmark index figure; in fact, the average tally has been way off the path shown by JP Morgan Treasury Index. The latter has turned out positive scores for both three- and six-month periods - 0.95 per cent and 2.02 per cent respectively.

Besides Grindlays Dynamic Bond, some of the bigger funds in the group are Pru ICICI Flexible Income (Rs 317 crore), ING Vysya Select Debt (Rs 197 crore) and Birla Dynamic Bond (Rs 154 crore).