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Debt Mutual Funds

Liquid Funds (Short Term): We use this as a strategic cash management tool.

Fixed Maturity Plans (Medium to Long Term): FMPs offer good post tax returns sometimes and we monitor these closely. Allocation depends on the returns relative to the prevailing risk free rate.

Long term Gilt/Bond Funds: We use this as a strategic tool to play the interest rate cycles especially when we feel that rates have peaked out.

High Yield Secured Debentures

We selectively invest in high yield debentures issued by various top bank sponsored NBFCs and/or listed Promoter Group Companies, secured by pledge of shares or real estate, with a high margin of safety (usually 2-3 times collateral to loan value).

Corporate Fixed Deposits

Company fixed deposits offer lucrative options at times for investors seeking high fixed returns There are a host of good corporates, which accept fixed deposits at attractive rates of interest for their working capital needs. The rate offered varies from company to company, but are generally higher than the rates offered by banks on their fixed deposits. These deposits come in various terms, ranging from 6 months to 3 years.

We at SKS Capital use Corporate FDs as a tactical wealth management tool to enhance the return on the overall assets. We use this option very selectively with high grade corporates when we see a favourable risk-reward equation. We also use our equity research skills and experience to evaluate these companies. For example, in mid 2010, as equity markets became more expensive and bank FDs were offering low returns of around 6 to 7 %, we chose to allocate some capital to corporate FDs of high quality companies, such as Jaiprakash Associates (a NIFTY 50 Company) and United Spirits (A BSE 100 Company), offering rates of around 12%.


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