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.