Thursday, August 14, 2014

Reliance Regular Savings Fund - Debt Option

 

Reliance Regular Savings Fund - debt Option

RRSF debt is essentially for an investor who has a time horizon of 12 to 18 months. Corporate Bond Fund is for an investor who has a time horizon of around 3 years. Second is as a corollary RRSF debt typically runs duration of close to 18 months, while Corporate Bond Fund will run duration of close to 3 years. This is almost double the duration of a RRSF Debt. So here the focus is on the reasonable accruals with potential capital gains built in if interest rates come down in medium term. However in RRSF debt almost the entire returns for the investor would come through accruals, if that investor stays invested for 18 months period. The portfolio duration in RRSF debt historically, since the RRSF started have never crossed 1.75 to 2 years. And it will continue to hover between the 1.5 to 2 year duration band.

In terms of credit profile, because RRSF runs a slightly lower duration of around 18 months we can have focus on higher accruals with a reasonably higher proportion of AA+ to A+ assets. In Corporate Bond Fund we are looking to bring some amount of duration also because the investor is coming with a slightly longer time horizon. So the Corporate Bond Fund is going to be more AA centric.

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