If I were Bill Gross, I would have done the same thing….When Bill Gross (the bond Guru?) took a stand that having a bull position in US Governement securities was not a sensible thing to do….I nodded..

He had a big portfolio of government bonds – about 250 billion US $! It is not easy to liquidate such a big portfolio, run a total bond fund and not hurt yourself! So he had some put options, and some more derivatives which helped him bring down the risk against the US G Sec falling.

However his current year performance has not been good and he is ranked above 500 in a field of 589 fund managers.

Of course he has admitted his mistake – and may have even reduced his puts.

This is again proof that you are better off in an index bond fund (no it does not exist in India) – preferably an ETF so that you play around with only the interest rate calls. You can pump as much money as you want into such a fund, and sleep tight without worrying about interest rate movements, or even the rating ups and downs.

When will we have a bond index fund? I do not know.

Our dynamic bond funds are not doing too well, and we do not have an index fund……what to do??

Well invest in a bond fund with a low duration like the Templeton fund….or put money in a dynamic bond fund and hope he does well.

  1. But even the equity ETF in India are not seeing great trading volumes as of now and the impact cost (spread between mkt price and NAV) is around 1% in many cases. ETF have some more way to go in India before they live up to their global reputation.

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