IDFC Bond Fund – Medium Term Plan
- Category: Short Term Bond
- Fund Manager: Suyash Choudhary
- Star Rating: 5 stars
- Analyst Rating: Neutral
- Credit Quality: High
- Interest Rate Sensitivity: Limited
- What you need to know: Not a compelling investment
- SEBI re-categorization: Medium Duration Fund
Choudhary returned to helm this fund in September 2015, having run it earlier from December 2011 to July 2013. A seasoned manager in running 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 such as corporate bonds and government securities.
The fund has been traditionally managed with a cautious approach by constructing a portfolio of high credit-quality instruments and its average maturity capped at four years.
As per the new category requirement, its duration will be maintained between 3 and 4 years.
However, the fund manager has the flexibility to reduce the portfolio duration between 1 and 4 years in case of an anticipated adverse situation. Within the defined limits, Choudhary will have the flexibility to invest across market segments--government securities, corporate bonds, and money market instruments. He understands the government-bond segment extremely well and has a lot of comfort around it.
Expectedly, he uses the same to good effect in the funds he manages. Interestingly, earlier this fund had a cap of 25% on government-securities exposure, which was done away with in 2016.
Choudhary prefers managing funds in an unconstrained manner, and that approach has held him in good stead in other funds he helmed. Clearly, the constraint here hasn’t allowed him to play to his strengths in the past; as a result, the fund has failed to distinguish itself in a peer-relative sense.
The fund’s peer group would change going ahead, and the new category offers a level playing ground for the funds. But the fund’s redefined framework continues to be restrictive in nature. We would like to see how the manager utilises the flexibility of investing in government securities, within the defined restriction on the fund’s duration, over a longer time frame before we build conviction in this offering.
