In April 2018, the bond market was extremely volatile, 10-year benchmark bond yields fell to 7.13% post RBI policy and then rose by 64 bps to 7.77%. Recently released RBI Policy minutes were quite hawkish with 2 RBI MPC members favouring rate hikes. The minutes have gone completely against the perceived guidance of status quo on rates for a longer period of time.
The volatility in government bonds filtered across segments with corporate bond yields rising across the rating curve. Hence returns on our FIGP portfolios were negative in April.
We are maintaining our portfolios as per our Investment Strategy Report for 2018. The portfolio details are given below.
Fixed Income Growth Portfolio (FIGP)
We have constructed two FIGP portfolios, one with fixed income securities and one with mutual fund fixed income schemes.
Since inception on 29th November 2013, the fixed income securities portfolio has generated absolute 54.1% returns or 12.21% CAGR. Since February 2018, the portfolio has given 3.87% annualized returns. Absolute last one month return is -0.65%.
FIGP was rebalanced in February 2018.Table 1 gives the FIGP with fixed income securities. The FIGP portfolio has 8.58% LICHF 2023 with 50% weight,13.8% Equitas 2022 and 9.55% Hindalco 2022 with weights of 25% each.Currently the portfolio has a weighted average yield of 9.01% and an average maturity of 4.7 years.
Table 2 gives the rebalanced FIGP with mutual fund schemes. We have removed liquid fund with 50% weight and distributing equally to short term income and Credit Opportunities fund with 50% weight each. The weighted average yield of the portfolio post expenses is 7.98% while the average maturity of the portfolio is 2.34 years. The mutual fund portfolio carries interest rate and credit spread risk.
Since 29th November 2013 the portfolio has generated absolute 52.94% returns, annualized to 11.94%. Since February 2018, the portfolio has given 6.10% annualized returns. Absolute last one month return is -0.53%.