« Gilt funds do not always go up in value. Should you invest in gilt funds? Case study: how can this middle aged investor with two children plan for retirement and children's goals? »

Mutual fund report card: Kotak Gilt Fund

Posted on 07 Jun 2023
Author: Sayan Sircar

Tags: Mutual Funds ; Review

4 mins read
Get new post notifications on WhatsApp!

This article shows the historical performance of this fund as an example of a long-running gilt fund to demonstrate the risk and return in a gilt fund.

Mutual fund report card: Kotak Gilt Fund

Kotak Gilt Fund is a gilt fund. Please read our primer on gilt funds here before proceeding: Gilt funds do not always go up in value. Should you invest in gilt funds?

About Kotak Gilt Fund

Data for this section is from the website of Kotak Gilt Fund as on 19-May-2023. The link is here.

Scheme details

Scheme details of fund 100265 as on 2023-19-05

This fund invests primarily in long-term gilts issued by the Central government and has existed since 1998. The fund is benchmarked against the Nifty All-Duration G-Sec index.

Scheme returns

Scheme returns of fund 100265 as on 2023-19-05

Investors should note that the fund has beaten the benchmark for the direct plan. In contrast, the regular plan (performance figures here) has not due to the extra 1% TER.

Scheme risk and potential risk matrix

Scheme risk and potential risk matrix of fund 100265 as on 2023-19-05

As per the Potential Risk Class (PRC), this section shows that the fund has considerable interest rate risk, which we will explore next. Read more on PRC here: How to use the SEBI Potential Risk Class matrix to understand risk in debt mutual funds?

Recent articles:

1 / 3

<p>A quick retirement calculation for a reader query who has a good amount of corpus already saved for retirement.</p>

2 / 3

<p>This article explains the PFRDA announcement about a new default scheme under NPS Tier II for government employee subscribers.</p>

3 / 3

<p>As per SEBI rules, mutual fund investors must have nominees in their folios by 1st October 2023 or explicitly opt out. Otherwise they will face restrictions in selling units.</p>

❮ ❯

Join the Arthgyaan WhatsApp community: You can stay updated on our latest content and learn about our webinars. Our community is fully private so that no one, other than the admin, can see your name or number. Also, we will not spam you.

Our analysis of Kotak Gilt Fund

Data for this section is from the AMFI website for Kotak Gilt Fund as on 19-May-2023.

Rolling lump-sum returns of Kotak Gilt Fund

We calculate rolling returns for multiple holding periods to see the maximum and minimum returns over different holding periods.

Short-term Rolling returns

Short term Rolling returns of fund 100265 as on 2023-19-05

Medium-term Rolling returns

Medium term Rolling returns of fund 100265 as on 2023-19-05

Long-term Rolling returns

Long term Rolling returns of fund 100265 as on 2023-19-05

As the charts show, beyond a 2-year holding period, a one-time investment in this fund has yet to lose money.

Rolling lump sum returns and their distribution

Lump sum distribution of fund 100265 as on 2023-19-05

We combine all the different holding periods and check the average, maximum, minimum and dispersion (measured via standard deviation). We see that as the holding period increases:

the minimum return increases
the variability of returns reduces
the gap between maximum and minimum returns reduces

We have also counted the cases where the fund has beaten inflation (8%) and FD rates (7%) over this period in the pie chart. The only instances where there was a loss were for holding periods shorter than 3 years. Such losses, which are a manifestation of interest rate risk, occur when interest rates rise.

Now we will see how SIP investments, one fixed and one 10% yearly top-up, have performed.

Rolling fixed SIP return distribution

Fixed SIP distribution of fund 100265 as on 2023-19-05

Rolling 10% per year top-up SIP return distribution

10pct-topup SIP distribution of fund 100265 as on 2023-19-05

We see similar trends with increasing the investment holding period for an investment made monthly in SIP form. Interestingly the top-up SIP returns are higher than the fixed SIP due to significant interest rate decreases in the economy in the last few years.

What should investors do with this fund?

As the chart shows above, there is quite a bit of fluctuation in the NAV movement of gilt funds that investors should be mindful of.

The graph has a long-term upward trend (dotted blue line). Still, there have been many periods with sharp rises, falls and even sideways movement in the NAV, as shown in red ovals. These characteristics mean that gilt funds have similar movement characteristics to equity funds but are less intense in both rises and falls. As we have seen above, these funds are unsuitable for short-term investments, whether as a lump sum or in SIP form.

The key here is to combine this gilt fund and similar ones with both equities and short-duration debt funds to create a diversified portfolio. We will cover the concept in a future article.

What's next? You can join the Arthgyaan WhatsApp community

You can stay updated on our latest content and learn about our webinars. Our community is fully private so that no one, other than the admin, can see your name or number. Also, we will not spam you.

If you liked this article, please leave us a rating

The following button will take you to Trustpilot:

Discover an article from the archives

Worked out case studies for goal-based investing

Case study: how can this middle aged investor with two children plan for retirement and children's goals?

This article shows how a single-income middle aged couple with two small children reach their retirement and children’s goals.
Case study: can this double income single kid family reach FIRE at 50?

This article shows how a double-income couple with a 2-year old reach their FIRE dream at the age of 50.
Case study: how a family in their mid-30s with a newborn kid can FIRE and invest in real estate?

This article shows how a double-income couple with a newborn child can invest for their future goals of FIRE and real-estate investment.
Case study: how this double income recently married family can perform DIY goal-based investment planning

This article shows how a young just-married couple can invest for future goals using the Arthgyaan goal-based investing tool.
Case Study: How should couples in their 40s with a new baby plan their financial future?

Did you welcome a bundle of joy in your 40s? This article will discuss ways of planning the child’s (and your’s financial future)
Case study: how this double income single kid family can perform DIY goal-based investment planning

This article shows how a very typical salaried couple with one child can invest for future goals using the Arthgyaan goal-based investing tool.

Previous and next articles:

Mutual Funds

Gilt funds do not always go up in value. Should you invest in gilt funds?

This article explains if Indian investors should consider investing in gilt or government securities mutual funds for their goals.

Published: 4 June 2023

6 MIN READ

<p>This article shows how a single-income middle aged couple with two small children reach their retirement and children’s goals.</p>

Case Study

Case study: how can this middle aged investor with two children plan for retirement and children's goals?

This article shows how a single-income middle aged couple with two small children reach their retirement and children’s goals.

Published: 11 June 2023

11 MIN READ

Latest articles:

<p>This article shows a handy ready reckoner for home loan EMI amounts for all tenures and interest rates along with the amount of principal and interest to be paid.</p>

House Purchase

How much EMI do I have to pay for my home loan?

This article shows a handy ready reckoner for home loan EMI amounts for all tenures and interest rates along with the amount of principal and interest to be paid.

Published: 29 September 2023

1 MIN READ

Retirement Reader Questions

How much money does this 39 year old investor need to invest per month to retire at 58?

A quick retirement calculation for a reader query who has a good amount of corpus already saved for retirement.

Published: 27 September 2023

7 MIN READ

Topics you will like:

Asset Allocation (20) Basics (8) Behaviour (10) Budgeting (11) Calculator (17) Case Study (6) Children (12) Choosing Investments (38) FAQ (6) FIRE (13) Gold (11) Health Insurance (4) House Purchase (17) Insurance (15) International Investing (10) Life Stages (2) Loans (9) Market Movements (13) Mutual Funds (29) NPS (6) NRI (13) News (9) Pension (8) Portfolio Construction (46) Portfolio Review (27) Reader Questions (6) Real Estate (6) Retirement (36) Review (12) Risk (6) Safe Withdrawal Rate (5) Set Goals (27) Step by step (14) Tax (37)

Next steps:

1. Email me with any questions.

2. Use our goal-based investing template to prepare a financial plan for yourself
OR
use this quick and fast online calculator to find out the SIP amount and asset allocation for your goals.

Don't forget to share this article on WhatsApp or Twitter or post this to Facebook.

Discuss this post with us via Facebook or get regular bite-sized updates on Twitter.