The assets under management in gilt funds almost doubled from Rs 3442 crore in April 2012 to Rs 6500 crore in December 2012.
Boost in returns of government papers ahead of expectations of downward interest rate trend has spurred AMCs to launch gilt funds. Recently, Motilal Oswal has filed offer document with SEBI to launch its MotilalOswalMOSt 20 Plus Gilt Fund. BNP Paribas is also planning to launch its BNP Paribas Government Securities Fund. Morgan Stanley has also submitted its offer document for Morgan Stanley Gilt Fund with SEBI.
The recent two fund launches in this category have received decent response from investors. Indiabulls Gilt Fund which closed its NFO on January 11 collected Rs.102 crore. Before that, IDBI Gilt Fund launched in December 2012 collected Rs 120 crore.
Corporates have traditionally been large investors in gilt funds, constituting Rs. 2157 crore or 64% of total assets in gilt funds as on September 2012. Retail investors constitute roughly 7% of this share.
“Gilt funds are seasonal in nature. These funds benefit first if there is an interest rate movement. Retail investors generally invest in dynamic bond funds which has a gilt component in it.The age of assets staying in a gilt fund depends on interest rate outlook. We had a fair mix of participation from HNI, corporates and retail in our gilt fund NFO,” said Sarath Sarma, Executive Director & Head- Sales, IDBI Mutual Fund.
Expectations of a rate cut by RBI in the forthcoming monetary policy meeting on January 29 has made investors flock to gilt funds in October, registered net inflows of Rs 1018 crore and Rs 1006 crore in November. From April to December, the net inflows in this gilt funds stood at Rs 2551 crore. The assets under management almost doubled from Rs 3442 crore in April 2012 to Rs 6500 crore in December 2012.
The inflows in gilt funds started from June 2012. Investors pulled out Rs 230 crore (net outflow) in April 2012 and Rs 371 crore in May 2012 as government bond price went down. “Many investors were expecting a rate cut in the credit policy on 18thJune and were expecting government bond prices to appreciate after that. Since there was no rate cut, government bond prices are trending down,” said Dhawal Dalal, Head – Fixed Income, DSP Black Rock Investment Managers, in an earlier interview with Cafemutual.
According to Value Research data, medium and long term gilt funds have an average of 11% return during the last month.
