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UTI to pare investment in dud debt papers

Rakesh P Sharma & Janaki Krishnan

Mutual fund behemoth Unit Trust of India plans to completely phase out all its investments in debt instruments rated A+ and below.

K Ramkumar, assistant general manager, said: "We have already reduced investments in A-rated papers in UTI Bond Fund from 7 per cent to around 2 per cent as not many investors are comfortable with the investment." He further said, "We have now decided to completely phase out investment in these papers."

Ramkumar, who currently manages debt schemes with a corpus of more than Rs 35 billion including UTI Bond fund, UTI G-Sec fund and Institutional Investors Special Fund Unit Scheme 97 (2), does not expect the bond market to be as robust as last year.

Ramkumar joined the trust 11 years ago as a junior level officer from the state-owned Bank of Maharashtra.

Ramkumar elaborated, "We are more aggressive in government securities but avoid going to extremes. We have increased the average portfolio maturity from 7.6 to 8.3 years from last month."

UTI's G-Sec Fund has given an annualised return of 20.27 per cent in the last one year and 14.52 per cent since inception.

Meanwhile, UTI Bond Fund has achieved a compounded annualised return of 14.55 per cent in the last 12 months. But the fund has been holding on to a slightly higher cash component than other players- around 15-16 per cent compared to just 2-3 per cent held by others.

"The high cash component allows us to take advantage of the opportunities that come our way. When we see opportunities, we will reduce the cash component," he said.

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