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Morningstar: Mutual Fund Guide

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Morningstar: Mutual Fund Guide
Morningstar India - 02 January 2021

IDFC Government Securities Fund - Investment Plan

Investment Strategy

Suyash Choudhary is a seasoned manager in running duration strategies. His strength lies in his in-depth understanding of the macroeconomic environment and his ability to anticipate interest rate movements and identify attractive investment opportunities across market segments.

Given that duration is an integral part of the strategy, studying the macro scenario for interest-rate directional views forms the broader framework of the process. The interest-rate direction is determined by a detailed analysis of influencing factors such as growth versus inflation, fiscal and current account deficit, private sector and government borrowings, fiscal and monetary policy view, money supply, currency market movement, and global interest-rate scenario. This is complemented by an overlay of technical factors where the team examines the supply/demand dynamics to get clarity on valuations and the direction of the yield curve. Subsequently, interest-rate direction calls, and anticipation of yield-curve movement, form the basis of portfolio positioning in duration terms. Suyash does not mind taking bets against the grain if the risk/reward is favourable. A noteworthy aspect of the approach is that the investment team takes a relatively long-term view and does not pay much heed to news flows. Therefore, trading is not the core of the process, as the focus is on getting the interest-rate directional calls right.

Suyash dynamically manages the fund’s maturity profile, depending on his reading of the macro scenario. Suyash’s skills and research-driven approach should hold the fund in good stead going forward.


UTI Mastershare Unit Fund

Manager Biography And Fund Strategy

UTI Mastershare is a conservatively managed fund with an impressive track record of 32 years across all market cycles. Swati Kulkarni has been associated with UTI AMC for the past 28 years. She has been at the helm since November 2006, building a solid track record. She is aided by a competent and large investment team.

Kulkarni invests predominantly in reasonably priced leading businesses of large-caps from the benchmark index, the BSE 100. The fund takes a topdown approach for sector weights and uses a bottom-up view for stock selection. The initial investment process is to determine which companies have generated higher operating profits and demonstrated long-term return on equity. The team emphasises the trends and patterns discerned from historical performance rather than from the forecasts. From a qualitative aspect, the focus is on strong management, the company’s business model, and competitive advantages. Kulkarni relies on relative valuations for evaluating stocks, deploying measures such as price/earnings, price/book value, and EV/EBITDA, though she also invests in stocks that she considers to be fairly valued if she is convinced about the earnings growth or in her quest for a quality business. She does not drastically move away from the benchmark and at the same time takes active calls on benchmarks, sectors, and stocks. The investment strategy is uncomplicated, but Kulkarni’s execution, especially in the testing markets has been noteworthy.

The fund maintains a diversified portfolio, and, with its buy-and-hold strategy, the portfolio turnover ratio is lower than peers. The fund’s relatively conservative nature can cause it to underperform in market rallies. Nevertheless, her investment style should hold the fund in good stead over the long haul of a full market cycle.


Mirae Asset Emerging Bluechip Fund

Manager Biography And Fund Strategy

The manager’s distinctive stock-picking ability and skilled execution are the defining factors of Mirae Asset Emerging Bluechip Growth. Lead manager Neelesh Surana is quite experienced and also heads the equity function as CIO. Ankit Jain started co-managing this fund in January 2019. The portfolio managers are aided by an experienced investment team.

The team combines fundamental analysis with quantitative screens, seeking firms with high earnings growth potential, strong balance sheets, and high cash flow. It also looks for price value gap in-stock selection and considers such metrics as P/E, P/B, and EV/EBITDA. It avoids smaller companies as the idea is not to buy in at an early stage but to invest in evolving mid-caps that have the potential to become large-caps. While selecting mid-cap stocks, the manager typically looks for slightly higher ROE and growth rates as compared with large-cap stocks, given these stocks come with liquidity and other risks. Within the framework, a lot of emphases is on qualitative analysis, such as management quality and execution capabilities. These are quantified by evaluating the trailing 10-year record, which helps in removing subjectivity. The team also leverages the analysis of sell-side research and expertise from a global research team based in Hong Kong.

It is a well-diversified portfolio of around 60-65 stocks. The manager avoids compromising on liquidity; hence, with the fund’s increasing size, it is closed for lump-sum investments and has also restricted investments through SIP only once a month. The fund remains fully invested and avoids churning the portfolio often. This is reflected in the fund’s lower turnover ratio relative to peers. The lower expense ratio compared to peers makes the fund more appealing.

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