Funds that got Negative ratings

By Morningstar Analysts |  10-06-20 | 
 

The Morningstar Analyst Ratings start at Gold and move on to Silver and Bronze. These are the positive ratings. Then there is Neutral and the Negative rating.

Over the past six months, these debt funds were downgraded by our analysts to Negative.

HDFC Income Fund

  • Date of Analysis: December 2019
  • Analyst: Nehal Meshram
  • Category: Medium to Long Duration
  • Star Rating: 4 stars
  • Credit Quality: High
  • Interest Rate Sensitivity: Moderate

The fund has a highly experienced fund manager, a well resourced team and an established investment process. However, average execution and high fees limits our conviction. The 5- and 10-year returns put it in the second quartile, but the 3- and 1-year returns are in the third quartile. The YTD and 3-month returns put it in the lowest (fourth) quartile. Read the analyst’s view on the fund.

Nippon India Credit Risk Fund

  • Date of Analysis: May 2020
  • Analyst: Nehal Meshram
  • Category: Credit Risk
  • Star Rating: 3 stars
  • Credit Quality: Low
  • Interest Rate Sensitivity: Limited

The change in the lead fund manager is disappointing. With the new managers, there is uncertainty with regards to execution. The returns in 2019 put it in the third quartile. Add to it huge redemptions due to a tight liquidity situation in the lower rated bond market, and concerns over the worsening economic situation and sentiment around debt funds. Read the analyst’s view on the fund.

DSP Credit Risk Fund

  • Date of Analysis: May 2020
  • Analyst: Nehal Meshram
  • Category: Credit Risk
  • Star Rating: 4 stars
  • Credit Quality: Medium
  • Interest Rate Sensitivity: Limited

After a top-quartile performance in 2015 and 2016, it began to slide. Last year it began to throw up some better numbers. The fund is run with an unconvincing investment process, a revised mandate, frequent change in portfolio manager, and inefficient execution. Read the analyst’s view on the fund.

Franklin Templeton’s decision to wind up the below funds came without warning—thus, shocking investors and observers, us included.

The funds were run with the clear mandate of taking risk. They had significantly higher sub-AAA exposure than peers. Downgrades, defaults and liquidity risks were inherent to the strategy. But our conviction stemmed from the team’s expertise in the lower credit space.

However, gating investors is not an acceptable outcome, and it should have not reached this stage. This points towards mismanagement.  

Franklin India Ultra Short Bond Fund

  • Date of Analysis: May 2020
  • Analyst: Himanshu Srivastava
  • Category: Other Bond
  • Star Rating: 5 stars
  • Credit Quality: High
  • Interest Rate Sensitivity: Limited
  • Read the analyst's view on the fund.

Franklin India Short Term Income Plan

  • Date of Analysis: May 2020
  • Analyst: Himanshu Srivastava
  • Category: Other Bond
  • Star Rating: 3 stars
  • Credit Quality: Medium
  • Interest Rate Sensitivity: Limited
  • Read the analyst's view on the fund.

Franklin India Low Duration

  • Date of Analysis: May 2020
  • Analyst: Himanshu Srivastava
  • Category: Other Bond
  • Star Rating: 4 stars
  • Credit Quality: Medium
  • Interest Rate Sensitivity: Limited
  • Read the analyst’s view on the fund.

Franklin India Income Opportunities Fund

  • Date of Analysis: May 2020
  • Analyst: Himanshu Srivastava
  • Category: Other Bond
  • Star Rating: 3 stars
  • Credit Quality: Medium
  • Interest Rate Sensitivity: Moderate
  • Read the analyst’s view on the fund.

Franklin India Credit Risk Fund

  • Date of Analysis: May 2020
  • Analyst: Himanshu Srivastava
  • Category: Other Bond
  • Star Rating: 3 stars
  • Credit Quality: Medium
  • Interest Rate Sensitivity: Limited
  • Read the analyst’s view on the fund.

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Mahendra Yadav
Jul 17 2020 01:54 AM
 Down grade and analysts comments in respect of FT have come in too late and of no use, investors in Franklin Tempelton debt funds are already stuck and are in know of the entire situation better than Mr Himanshu ,an analysis is of use if it highlights risks or reward with strong recommendations well in time. Post incident analysis is waste of time in such cases.
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