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The fund benefits from the presence of a seasoned manager in Shobhit Mehrotra and his investment style, which focuses on keeping risks at bay. Mehrotra is supported by a stable team composed of senior managers like Anil Bamboli and Anupam Joshi. The fixed-income team is on the leaner side, and we believe there is scope for expansion in it, particularly in the active duration space and credit research front. This leads us to bring down the People Pillar to Above Average from High. There is a lot riding on Mehrotra and Bamboli, and these additions, if made, would rationalise their responsibilities further and provide more depth to the team. Hence, we assign a Morningstar Analyst Rating of Bronze to the fund’s direct share class and Neutral to the more expensive regular share class.Mehrotra’s investment approach lays greater emphasis on safety and liquidity. He primarily invests in higher-quality fare and papers issued by strong and stable private sector companies, public sector undertakings, and government securities. Credit bets are taken with a measured approach. The focus is to ensure that the risks are maintained at manageable levels. This approach helped the fund to comfortably ride through the credit crises in the Indian debt market.Medium duration category houses funds with varied strategies–from credit-centric to funds that invest only in highly rated securities. The investment philosophy of this fund is to optimize returns without taking extensive risk. Hence, taking active duration calls is not a part of the strategy. Credit bets are taken, but the exposure to sub-AAA rated securities is typically maintained below 35% of the portfolio. Therefore, the performance is largely driven by investing in good-quality, high-yielding corporate bonds and sub-AAA rated securities.The strategy is not without risks. Since credit is an integral part of the strategy, the fund would be exposed to credit events. While its limited exposure in the lower credit space would cushion the impact of adverse scenarios, it would lag its more flexible peers who can go down the credit ladder when doing so is favourable. Also, medium duration is a very competitive category, and it is evolving after the crises in the debt market. Hence, it would be prudent to see how it stacks up against its peers going ahead.Nonetheless, the strategy continues to have the wherewithal to deliver outperformance over the long term, which makes it a convincing product for investors who can withstand credit risks.
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