Kotak Corporate Bond Fund

Kotak Corporate Bond Fund invests predominantly in high-grade corporate bonds, i.e., debt instruments with a credit rating of AA+ and above. This is an open-ended debt mutual fund scheme. The Fund's target is to provide optimum returns to investors by investing in an actively managed portfolio of debt securities of high-quality corporations. The Fund portfolio includes 96.43% investment in high-grade corporate bonds and a balance of 3.57% in cash and cash equivalents.

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Kotak Corporate Bond Fund is available in 4 categories:

  • Direct Growth
  • Direct IDCW Monthly
  • Regular Growth
  • Regular IDCW Monthly

While Regular plans are those in which investors acquire mutual fund units through the agent network, Direct Plans comprise those in which investors buy mutual fund units straight from the Fund House.

Income Distribution cum Capital Withdrawal (Payout and Reinvestment Facility) (IDCW) is the Plan in which the Scheme offers payout each month with reinvestment. The payout transfer facility is subject to the sufficiency of distributable surplus as per extant SEBI guidelines.

Table: Investment Facts

Parameter

Details

Fund Name 

Kotak Corporate Bond Fund (Regular & Direct)

Fund House

Kotak Mutual Fund

Launch Date 

September 2007

Benchmark

CRISIL Corporate Bond Fund

Type

Open-Ended

Minimum Investment 

Rs. 5000

Minimum Additional Investment: Rs.1000

Minimum SIP Investment: Rs.1000

Minimum SWP Investment: Rs.1000

Lock-in Period

No Lock-in

Entry Load

N.A.

Exit Load

N.A.

Return Performance

Average

Fund Consistency

Average

Risk Level

Low

Investment Objective

Kotak Corporate Bond Fund aims to generate returns and capital appreciation by predominantly investing in corporate debt securities of varying maturities across the credit spectrum. The Scheme will seek opportunities across the credit curve and will endeavour to take benefit from superior yield available from time to time. The Fund allocates its corpus across high-grade corporate debt securities, money market instruments, and other instruments, including government securities and below AA+ rated corporate securities. The fund management team endeavours to maintain ample liquidity within the Fund.

In an open-ended scheme, investors get to invest in Kotak Corporate Bond Fund units at NAV-based prices on all business days. The Fund has provided average returns to investors in its category.

Fund Summary

  1. Kotak Corporate Bond Fund Regular Plan-Growth

    • Risk level-Low to Moderate
    • NAV-Rs. 2,939 as of 18.06.2021
    • Expense Ratio-0.67 %
    • Fund Started-21.09.2007
  2. Kotak Corporate Bond Fund Regular Plan IDCW

    • Risk level-Low to Moderate
    • NAV-Rs. 1,045.4821 as of 18.06.2021
    • Expense Ratio-0.67 %
    • Fund Started-21.09.2007
  3. Kotak Corporate Bond Fund Direct Plan-Growth

    • Risk level-Low to Moderate
    • NAV-Rs.3,026.5270 as of 18.06.2021
    • Expense Ratio-0.32%
    • Fund Started-01.01.2013
  4. Kotak Corporate Bond Fund Direct Plan IDCW

    • Risk level-Low to Moderate
    • NAV-Rs. 1,082.8885 as of 18.06.2021
    • Expense Ratio-0.32%
    • Fund Started-01.01.2013

Fund Returns Summary

  1. Kotak Corporate Bond Fund Regular Plan Growth-Returns Summary

    Time Period

    Returns Per Year (Annualized)

    6 Months

    1.64%

    1 year

    6.33%

    2 years

    8.01%

    3 years

    8.35%

    5 years

    8.09%

    10-years

    8.48%

    Since Inception

    8.16%

  2. Kotak Corporate Bond Fund Regular Plan IDCW- Returns Summary

    Time Period

    Returns Per Year (Annualized)

    6 Months

    1.62%

    1 year

    6.32%

    2 years

    6.98%

    3 years

    6.80%

    5 years

    6.34%

    10-years

    6.79%

    Since Inception

    6.25%

  3. Kotak Corporate Bond Fund Direct Plan Growth-Returns Summary

    Time Period

    Returns Per Year (Annualized)

    6 Months

    1.82%

    1 year

    6.68%

    2 years

    8.34%

    3 years

    8.68%

    5 years

    8.39%

    Since Inception

    8.73%

  4. Kotak Corporate Bond Fund Direct Plan IDCW- Returns Summary

    Time Period

    Returns Per Year (Annualized)

    6 Months

    1.81%

    1 year

    6.66%

    2 years

    7.27%

    3 years

    7.07%

    5 years

    6.61%

    Since Inception

    7.03%

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Pros and Cons Of Kotak Corporate Bond Fund 

Pros

Cons

The Scheme provides returns that are generally higher than bank fixed deposits.

The Fund has slightly underperformed its benchmark since inception.

The risk of incurring a loss in a corporate bond fund is minimal. 

The Fund has no scheduled repayment of capital or contracted returns, unlike a bank deposit.

A corporate bond fund stands to earn stable returns over the medium to long term, notwithstanding the interest rate movements.

In the short term, corporate bond funds are vulnerable to price volatility due to interest rate movements. 

Benefits of Kotak Corporate Bond Funds

Investment in Kotak Corporate Bond Fund provides the following benefits to the investors.

  • Successful Track Record: Kotak Mutual Fund has a successful track record of creating value for its investors by investing through various business cycles since 1998. The experienced fund managers of Kotak Mutual Fund have been investing, among other things, in rated papers of corporates having a clean background, reliable management quality, and robust business and financial strength.
  • Optimum Investment Allocation: As per SEBI regulation, corporate bond funds invest 80% and above of their corpus in the highest-rated corporate bonds. These bonds have a rating of AA+ or better, making these funds have a relatively lower risk profile. These funds can invest in long-duration securities when interest rates reduce and invest in short duration securities when interest rates are on the rise.
  • Indexation benefit: To attain maximum benefits, it is worthwhile to invest in corporate bond funds for a tenure of 2-3 years. However, by investing for more than three years, one may obtain indexation benefits available under income tax laws. The gains from the sale of debt funds are taxed at 20% after the indexation benefit. Investors whose income is in the highest tax bracket but wanting to invest in debt instruments will stand to benefit from this provision.

Who Should Invest in Kotak Corporate Bond Fund?

While Kotak Corporate Bond Fund is ideal for an investment horizon of 2-3 years, such funds don't suit all investors. Funds such as Kotak Corporate Bond Fund are suitable for investors who wish to invest in the bond market but find it challenging to make any investment decisions due to interest rate movements. Conservative investors, who prefer not to witness volatile price movements, are advised not to venture into debt funds. Investors, who can bear through the risk of short-term price volatility, may look at a 2-3 year investment tenure.

*All savings are provided by the insurer as per the IRDAI approved insurance plan. Standard T&C Apply

Conclusion

Investors with a target investment period of 2-3 years in debt instruments may consider investing in Kotak Corporate Bond Fund.  Prior to investing, it is essential to analyze the past performance of the Fund. Kotak Corporate Bond Fund’s annualized returns have been sub-par compared to the benchmark, CRISIL Composite Debt Index. One may expect to earn higher returns than a bank fixed deposit.

FAQ's

  • Q. Should I invest in Kotak Corporate Bond Fund as a lump sum or by way of a SIP?

    A. Investors with a target investment period of 2-3 years in debt instruments may consider investing in Kotak Corporate Bond Fund. Debt funds tend to be subjected to volatility in line with interest rate movements. Given this characteristic, the systematic investment plan (SIP) route is advisable to spread the duration risk over investment tenure.
  • Q. Is Kotak Corporate Bond Fund an effective investment tool for long-term wealth creation?

    A. Being a debt fund, the returns of Kotak Corporate Bond Fund may not beat inflation substantially. The Fund delivers steady, low to moderate returns. Due to this, the Fund is not suitable to build wealth in the long run.
  • Q. What are the inherent risks associated with investing in Kotak Corporate Bond Fund?

    A. Investments of a debt fund bear inherent risks such as trading volumes, inability to sell securities, interest rate risk, default risk, liquidity risk, reinvestment risk, etc. While these risks can certainly be mitigated by hedging and diversification, they cannot be eradicated. The Fund Manager endeavors to construct the portfolio according to the guidelines specified under the extant SEBI Regulations to minimize these risks.
  • Q. How does a fund like Kotak Corporate Bond Fund earn more than bank fixed deposits?

    A. Corporates with a lower credit rating pay a higher interest rate to attract investors, such as mutual funds. The fund managers of Kotak Corporate Bond Fund are highly trained to invest in such opportunities during favorable market conditions and ensure the Fund's liquidity. Thus, by investing even 20% of the Fund in lower-rated credit-worthy corporations, the Fund can return higher than bank fixed deposits.
  • Q. How will I get to know the performance of Kotak Corporate Bond Fund?

    A. Investors may visit the official Kotak M.F. website. The link provides returns over 1 day to 10 years and since inception. It also provides the performance of Kotak Corporate Bond Fund in comparison to its benchmark, the CRISIL Composite Debt Index.
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