Product Crack | Kotak Credit Opportunities Fund

Name of new fund offer (NFO)

Kotak Credit Opportunities Fund

What is it about?

It would invest significantly in debt papers with a maturity of up to one year, and also those maturing after a year. On the basis of the maturity, the NFO would position itself between Kotak’s short-term bond fund and long-term bond fund.

What works?

It has a potential for aggressive investors looking for a relatively shorter duration but seeking more returns than what a typical short-term fund would give. As Kotak’s Short-Term Bond Fund (KST) invests in debt papers with a duration of 5-12 months, the new fund is an aggressive option to KST. Kotak Mutual Fund’s debt fund management enjoys good pedigree and has delivered consistently.

What doesn’t?

Understanding the duration is necessary to get the most out of any debt fund, especially the risky ones. Say, a fund has a duration of a year and you withdraw within two months, the returns may disappoint. Since this fund aims to have a chunk of its assets that mature in a year’s time, it may be too aggressive for investors seeking to invest for 3-6 months. Also, as per its offer document, it gives its fund manager flexibility to be almost on a par with its short-term fund, which could be a risk in the long run.

Money Matters Take

KST is a safer choice if you wish to invest conservatively over six months to up to a year. The NFO may offer something new, from what KST offers, but how well it is able to differentiate itself from short-term funds is to be seen. Too many products confuse the investor, especially if there is choice. Aggressive short-term funds may be an option.

Source: http://www.livemint.com/2010/04/26205635/Product-Crack--Kotak-Credit-O.html