Kotak Medium Term Fund is a mutual fund investment scheme which endeavors to generate regular income and capital appreciation for its investors. An open-ended debt scheme, it looks to achieve this by investing in a portfolio comprising of medium-term debt and money market instruments. Like several other income funds, this mutual fund investment is suitable for investors looking at medium-term returns. The fund is benchmarked against the CRISIL Composite Bond Fund Index. This scheme ranks amongst the top mutual funds in India and is currently ranked third in the ‘Credit Opportunities Funds’ category by CRISIL for the first quarter of 2017 ended in June which remains unchanged from the previous quarter.
The minimum investment amount for investing in this fund scheme is Rs. 5,000. If an investor opts to choose the SIP investment route, then the minimum required investment is Rs. 1,000. Launched on 28th of February, 2014, this fund is managed by seasoned stock-picker, Mr. Deepak Agrawal. A CFA and CA, Mr. Agrawal has been associated with Kotak AMC since the year 2000. This fund is ideal for investors looking to maintain a portfolio duration of three to five years and are willing to absorb the volatility of the fund. This duration allows the fund to tap any potential opportunities at the longer end of the yield curve. Additionally, the fund is suitable for investors looking for higher returns in debt category and looking to achieve near-term goals such as a new car, embarking on a foreign vacation etc.
This scheme has been a consistent performer and has performed better than its peers in its category. In order to meet the fund’s investment objectivities, the fund management team tends to invest in a variety of debt and money market instruments while maintaining an optimum balance of yield, safety, and liquidity. Mr. Agrawal also takes into account the outlook for the interest rate environment by keeping close tabs on the Indian economy as well as by keeping a lookout for any developments in the international markets. Furthermore, the fund management team may not always look to invest in listed, secured and/or rated debt securities. The team also tends to keep an eye out for unlisted, unsecured and/or unrated securities of varying maturities. The team is also open to participating in several Initial Public Offerings (IPO), secondary market operations, private placements, right offers or negotiated deals. Similarly, the team may also look to enter into various repurchase and reverse repurchase obligations in all securities held by it, as per the prevalent guidelines/regulations applicable to such transactions.
In a bid to meet the fund’s investment objectives, the fund manager may also use his discretion to invest in derivative instruments such as interest rate futures, swap agreements etc. Additionally, while the fund may look to invest in unrated debt securities as well, there are protocols in place to ensure it does not hold more than 10 per cent of its net assets in them, issued by a single issuer, while the total investment in such instruments will not exceed 25 per cent of the net assets of this scheme. Although debt instruments carry various inherent investment risks such as interest rate risk, liquidity risk, default risk, re-investment risk, etc., the fund management teams ensure that they minimize such risks by way of diversification and by making use effective hedging techniques.
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