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Morningstar: Mutual Fund Guide

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Morningstar: Mutual Fund Guide
Morningstar India - 29 July 2019

UTI Gilt Fund

Investment Strategy

 

“Amandeep Singh Chopra has been managing funds since 2006 and has been at the helm of this strategy since February 2012. He heads the fixed income desk at UTI and is supported by two other portfolio managers with an average experience of around 10 years. The analyst team includes an economist who tracks the domestic and the international macro factors.

The Gilt fund invests in a combination of G-Secs and State Development Loans with duration positioning based on the team’s macro research and its views on the interest-rate directional movements. The team constantly tracks the markets to ensure it is invested in the most liquid papers that ensure tradability. Investments in SDLs are used as a tactical tool to generate additional alpha and can vary significantly. The fund tends to actively trade in Gilts to generate alpha and can invest a significant portion of its portfolio in a single sovereign paper.

They track OMOs, trading volumes, broader market interest-rate directional views, and peer positioning actively. The average maturity can fluctuate significantly and is positioned in line with Amandeep Singh Chopra’s view of the interest rate environment. He can take significantly large positions in single papers, and we have witnessed high levels of concentration in the past. The process includes a lot of risk-management procedures both on the fund and the business side, and these seem to be followed in a stringent manner. The strategy typically consists of fewer than 10 holdings, and the execution is largely influenced by the team’s ability to take the right macro calls and position itself across yield curves.”

 

 

HDFC Equity Fund

Manager Biography And Fund Strategy

 

Prashant Jain is an extremely skilled and experienced investor who has one of the longest track records in the Indian mutual fund industry. He has been managing the fund since 2003. Jain has a big influence on HDFC AMC’s investment strategy in his role as CIO, which is a positive. The analyst team comprises of seven members and their responsibilities are divided along sectoral lines.

The process is solid with research at its core. Prashant Jain adopts a hands-on approach to research, to ferret out quality companies with robust business models, clean balance sheets and competitive strengths. He adopts a research-intensive approach to get an in-depth understanding of the business. Though the bottom up style is clearly integral to Jain’s investment style, the top-down isn’t ignored either. Hence, the style can be described as a mix of top-down and bottom-up, with the latter being a tad more important. Analysts rate stocks from their sectors based on their estimates of intrinsic value. They are required to maintain a history of their ratings, alongside reasons for changing ratings. This leads to introspection and constant evaluation of the process. Though recommendations are made with a two- to three- year horizon, it isn’t uncommon for stocks to feature in the portfolio for longer time frames. While picking stocks, Jain freely uses relative and absolute valuation methods. The focus on quality and fundamentals gels well with the long-term orientation. When the strategy is not in favour, Jain’s willingness to endure short-term pain and adhere to the approach instils predictability into the process. Expectedly, the investment process will deliver at its best over longer periods spanning a market cycle.

While constructing the portfolio, Jain is mindful of the benchmark index weights, but is not benchmark aligned.

 

 

Aditya BSL Frontline Equity

Manager Biography And Fund Strategy

 

Mahesh Patil has been with the fund company since October 2005 and has been managing this fund since November 2005. Patil is helped a strong research team also consists of nine analysts, three dealers, and a three-member knowledge management team.

Mahesh Patil considers the fund house’s investment universe and the IISL Nifty 50 Index when constructing the portfolio. Typically, he will invest in companies that display strong earnings growth potential, while focusing on parameters such as ROE and ROCE. Patil makes use of relative valuation measures, such as P/E, price/book value, and EV/EBITDA vis-a-vis comparable peers when selecting stocks. That said, he isn’t valuation-conscious in the strictest sense. Although he looks at valuations closely, Patil is willing to be flexible if he is convinced of the growth prospects. Patil has used short-term tactical plays to good effect on several occasions. He is not averse to increasing and reducing his allocation to the same stocks routinely based on price momentum and valuations. This pattern is perceptible in his long-held investments as well. Given that sector weights are aligned loosely to those of the benchmark index, the top-down approach is less significant than the bottom-up approach, but it isn’t ignored. Patil studies macroeconomic factors such as the domestic interest rate cycle, government policies, and developments in the global economy to determine the sector overweight/underweight positions.

The fund typically consists of around 80-85 stocks, with the manager aiming to remain fully invested. That said, the fund can tend to take a slightly higher exposure to cash based on market expectations.

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