IDFC Bond Fund – Long Term Plan
- Category: Dynamic Bond
- Fund Manager: Suyash Choudhary
- Star Rating: 4 stars
- Analyst Rating: Bronze
- Credit Quality: High
- Interest Rate Sensitivity: Limited
- What you need to know: A competent manager and the strategy that matches his skill set
- SEBI re-categorization: Long Duration Fund
Among fixed-income funds that are run with a duration strategy, this fund ranks as a worthy candidate. The fund has blossomed under Choudhary’s stewardship (since October 2010). A seasoned manager in managing duration strategies, his strength lies in his in-depth understanding of the macroeconomic environment, ability to anticipate interest rate movements, and ability to identify attractive investment opportunities across market segments.
As per the new category requirement, its duration will be maintained above 7 years.
Earlier, Choudhary had fluidly managed its duration based on his view of the interest-rate scenario. To that extent, the fund’s new positioning could be a limiting factor for the manager as he is at his best when given a free hand. However, there is no upper cap on duration for the funds from this category. Hence, the mainstay of the investment strategy will continue to be duration bets, with the level playing ground available to all funds from the category.
Also, Choudhary’s expertise in running active duration mandates would provide this fund an edge over peers.
Within the defined framework, Choudhary would continue to manage the fund with his trademark investment style, which involves taking active duration calls, investing in a free-flowing manner, and taking contrarian calls if the risk/reward is favourable. The strategy is not without risk. For instance, the strategy of freely moving across the yield curve and penchant for taking contra calls may not always work. Likewise, Choudhary’s fundamental-driven and long-term approach did not yield the desired results last year as the market reacted differently from the way it should have fundamentally behaved.
We draw confidence from Choudhary’s presence at the helm, which in our opinion is a big positive, but its high expense ratio is a cause for concern.
