Reliance Fund: A Healthy Mix Of Returns, Risk

Reliance Income Fund - Retail Growth Plan is an open ended income fund with a primary objective of generating optimal returns with moderate levels of risk. The fund is likely to concentrate its investments in fixed income instruments, and generally those with more than one year to maturity.

By optimal returns the fund means to restrict its exposure to high-risk debt securities and take a measured approach to investments, with a mix of liquid and debt instruments. The fund has an option to invest up to 50 per cent of the portfolio into liquid instruments.

The scheme has been one of the best performing income funds for many years. The scheme has given 9.62 per cent compounded annualised returns since inception - this is very healthy for a low-risk income fund with a track record of close to 10 years (it was launched in December 1997).

For the last three years, the fund generated 6.54 per cent compounded annualised returns, while the category average is 5.83 per cent and the benchmark CRISIL Composite Bond Index gave 5.37 per cent.

Though the rising interest rates in the past few years have been the main culprit for the fall in returns of most income funds, the current levels offer a good investment opportunity. There are clear signs of easing interest rates worldwide and some signs of a slowdown in industrial growth in the country.

The fund’s investment strategy has been good, though there have been many changes from the stated strategy.

The average maturity profile has been good and, in the last one year, there has been a distinct increase in the maturity profile. The fund manager has been very active and has invested a lot in liquid instruments to protect against adverse changes in interest rates.

Reliance Income Fund has a good track and it has been able to benefit from of the rally in debt markets on the back of softening interest rates globally.

For an investor looking for some diversification, income funds might be a good long-term bet - and Reliance Income Fund is surely one of the best options to consider.