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Morningstar: Mutual Fund Guide

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Morningstar: Mutual Fund Guide
Morningstar India - 02 August 2021

IDFC Dynamic Bond Fund

Investment Strategy

IDFC Dynamic Bond’s advantages include the tenacity of lead manager Suyash Choudhary and a strong process that draws on the firm’s robust macroeconomic and fundamental research. Choudhary is at his best investing in an unconstrained manner and the fund’s investment strategy complements his style.

Given duration is an integral part of this strategy, studying the macroeconomic scenario for taking an interest-rate directional view forms the broader framework of the process. The interest-rate direction is determined analyzing various 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 scenarios among others. This is complemented by an overlay of technical factors where the team examines the demand/supply dynamics to get clarity on valuations and the direction of the yield curve. Subsequently, interest-rate direction calls and anticipation of yield curve movement forms the basis of portfolio positioning in duration terms. For corporate bonds, the team lays lot of emphasis on the promoter group, its track record, and corporate governance standards. A noteworthy aspect of the approach is that the investment team takes a relatively long-term view.

Suyash Choudhary builds the portfolio with an emphasis on safety and liquidity. Taking credit bets is not a part of the strategy, which has enabled him to tide over credit risk more comfortably than most peers. He invests across the yield curve and segments--government securities, corporate bonds, and money market instruments.


Nippon India Multi Cap Fund

Manager Biography And Fund Strategy

Sailesh Raj Bhan has been managing this fund for 16 years now. His strong credentials and superior execution capabilities buoy confidence that the fund can keep producing top-flight results over the long term, notwithstanding short-term hiccups. The fund was retained in the multi-cap category when SEBI changed its investment mandate. Since the fund has traditionally followed a similar investment pattern, its broader framework and investment approach remain intact.

Sailesh Raj Bhan’s investment strategy is flexible in nature and encompasses multiple aspects. He plies a growth-at-a-reasonable-price approach to selecting stocks. He is conscious of valuations but does not mind paying more for a company if he thinks it has sustainable advantages over its peers and good growth prospects. He prefers companies which are leaders in their respective sectors and have healthy or rising ROEs over a three- to five-year period. Bhan also heeds qualitative issues when evaluating a company and uses fundamental research to scout for them. Taking big sector/thematic bets forms an integral part of the strategy. Bhan typically uses a macro-overlay to choose sectors. Another noteworthy aspect of Bhan’s investment style is his penchant for emerging/niche themes (roughly 20%), which he thinks have substantial upside potential over the long-term. He invests up to 10% of assets in value stocks to reduce price risk in the portfolio. Conversely, large-caps can generate market-linked returns, ensuring stability and adequate liquidity in the portfolio.

The fund’s portfolio demonstrates Sailesh Raj Bhan’s investment approach. He is benchmark-agnostic across sectors and stocks when building the portfolio.


SBI Focused Equity Fund

Manager Biography And Fund Strategy

“SBI Focused Equity is a benchmark-agnostic concentrated high-conviction strategy that aims to invest in stocks that meet the internal threshold in terms of the compounded annual growth rate and consistent return on capital over a horizon of three to five years. The strategy is managed by head of equity R. Srinivasan, who is a veteran at the AMC. Srinivasan is backed by a stable in-house process, and an experienced analyst team that has been trained in-house.

The manager focuses on parameters such as ROE and ROCE to uncover companies that can generate high growth on a sustained basis. The approach has a qualitative overlay; the manager relies on his research bent to uncover competencies such as technological prowess, cost margins, or a brand equity that gives the company an edge. R. Srinivasan doesn’t mind investing in richly valued stocks for the incremental growth, but he also scouts for value buys, which typically include firms that he believes are trading at a significant discount to their intrinsic value. This benchmark-agnostic approach and concentrated portfolio give the fund a unique flavor. Having said that, the portfolio is not without risks and could underperform in a momentum-driven market.

R. Srinivasan constructs a portfolio of roughly 30 stocks, with the top 10 accounting for roughly 50% of assets. Srinivasan focuses on investing in high-growth companies and can tend to pay a premium for incremental growth. Long-term growth stocks dominate the fund, but he also tends to invest some portion of the portfolio in tactical trades with an aim to generate additional alpha. The manager can tend to have considerably high exposure to cash and cash equivalents when there’s a dearth of ideas or in an extremely polarised market.”

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