Fund Review: Baroda Pioneer Dynamic Bond Fund

Baroda Pioneer Dynamic Bond fund from Baroda Pioneer Asset Management is an open ended fixed income scheme that will invest in fixed income instruments across various maturity profiles.

The minimum application amount is Rs 5,000 and in multiples of Re 1 thereafter. While there is no entry load, there is an exit load of 0.5% if it is redeemed within three months of allotment. There is no exit load if redeemed after three months.

Why invest in dynamic bond funds?
Dynamic bond funds, give flexibility to the fund manager to actively manage the duration of the fund, depending on the interest rate environment. When interest rates are likely to fall, the duration and average maturity of the fund will be longer. On the other hand if interest rate are likely to rise, the fund manage will opt for a short duration portfolio, as it will limit the interest rate risk. "Given the volatile interest rate scenario, it is difficult for retail investors to predict where interest rates are headed. Hence, they could allocate a part of their portfolio to dynamic bonds," says Deepak Panjwani, Head (Debt markets), GEPL Capital.

Why invest?
Interest rates could move up or down due to a combination of factors, like inflation, rate or growth rate of the economy, which is difficult to predict. Fund managers can alter the duration of the portfolio with ease in a dynamic bond fund, helping you to make the best of a volatile interest rate scenario.

Why not invest?
If a fund manager's call on interest rate movement goes wrong, the fund may not be able to generate higher returns for you.