The current market — whether equity or debt — may be quite intimidating for conservative investors. HDFC Multiple Yield 2005, a fund fashioned along the lines of a monthly income plan, sticks to short-term debt instruments with a small dose of equities thrown in.

The fund puts at least 80 per cent of its portfolio in debt, with the remaining in equity.

With 11 per cent returns over a five-year period, the fund tops the monthly income plan category.

It has done better than peers such as ICICI Pru MIP and DSPBR MIP. HDFC Multiple Yield 2005 is also a reasonably consistent fund, remaining in the top quartile of funds in its category across equity and interest rate cycles.

Investors looking for stable returns with low volatility can invest in this fund. Note that for a debt fund, a holding period of less than three years attracts short-term capital gains tax.

Performance

Across one-, three- and five-year time frames, HDFC Multiple Yield 2005 has ranked in the top quartile of funds in its category.

With returns of 21, 12 and 11 per cent, the fund is better than the category average by a margin of two to seven percentage points.

The HDFC Multiple Yield 2005 fund’s strategy of sticking to short-term maturity instruments reduces the interest rate risk; average portfolio maturity rarely goes over a year.

Its latest portfolio sports an average yield to maturity of 9.03 per cent with a 216-day average maturity.

This is among the better figures, with other funds clocking similar yields but with a far longer maturity.

From late last year, the fund stocked up on corporate debentures, which were then offering higher interest rates as bank credit dried up.

It was a strategy it followed in the rising 2011 interest rate cycle as well. Certificates of deposit are the other major debt avenue the fund invests in.

Risk is also reduced with debt investments made only in instruments rated AA and above (long-term) and A1 or P1 and above (short-term).

On the equity front, the fund moved close to the maximum 20 per cent from early 2013.

While this dampened returns a bit in the sluggish market, it served well during the rapid rise from August onwards.

In the 2011 downtrending market, the fund had less than 10 per cent in equities, a lesson it learnt after the high share of equity in 2008 weighed on returns.

The stock picks are usually an eclectic mix; while the portfolio holds a couple of blue-chips, it also has quite a few offbeat stocks. For instance, in its latest portfolio, while State Bank of India and Tata Motors are among the top holdings, Solar Industries and Banco Products also find a place.

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