Morningstar analysts assign ratings for funds using various parameters. The supreme rating is a Gold, followed by Silver, Bronze, Neutral and Negative. To understand what this means, do read What the rating indicates.
MIRAE ASSET TAX SAVER
- Analyst Rating: Gold (Direct), Silver (Regular)
- Category: ELSS
- Star Rating: 4 stars
This strategy is focused on identifying stocks with a GARP framework. The investment philosophy of the fund is built on three core principles: quality businesses with stable earnings, strong management, and attractive valuation. The process includes both quantitative and qualitative stock screening with bottom-up stock[1]picking. The sector selection is done through a top-down approach mainly based on growth prospects. Analysts then assess stocks at the industry and company levels and focus on key drivers such as returns on capital employed, returns on equity, and EBITDA margin. Within the framework, there is a lot of emphasis on qualitative analyses like management quality and execution capabilities. These are quantified by evaluating the trailing 10-year track record, which helps in removing subjectivity.
While selecting mid-cap stocks, the manager typically looks for slightly higher ROE and growth rates as compared with large-cap stocks, given these stocks come with liquidity and other risks. There is a further focus on valuation, which becomes a key driver behind entry and exit timing. This valuation process along with quantitative factors, drive the conviction level in the stock, which helps to exclude companies where business fundamentals are not solid. Meeting with company management is vital here to gain company[1]specific and industry information. The strategy holds a well-diversified portfolio with a long-term perspective, helping the fund outperform over the long haul.
SBI BANKING & PSU
- Analyst Rating: Silver (Direct), Neutral (Regular)
- Category: Banking & PSU
- Star Rating: 4 stars
The fund's strategy is to generate attractive returns through high-quality debt instruments of banks and public sector companies with a short duration mandate. It employs a bottom-up approach combined with a top-down overlay to generate superior risk-adjusted returns. A top-down approach guides portfolio position around predetermined risk parameters by assessing gross domestic product/inflation, monetary/fiscal policy, interest rate, liquidity, yield curve, credit spread, and so on, while the intensive bottom-up credit research uses an in-house model for security selection.
The managers use various qualitative and quantitative parameters and put a lot of emphasis on a company's management, business, and financial health. They also use the analysis of sell-side research and credit[1]rating agencies to form a view on the creditworthiness of companies but to a limited extent. The credit committee then reviews the rated securities, and the approved securities are assigned credit and tenor limits. While constructing the portfolio, the managers have the flexibility to implement the trades with reasonable leeway to express their views. The risk-management team periodically reviews the portfolio to ensure the managers adhere to the guidelines. We believe the flow of ideas/information is effective and fits nicely with the process in place, supporting an Above Average Process rating.
SBI CORPORATE BOND
- Analyst Rating: Silver (Direct), Neutral (Regular)
- Category: Corporate Bond
- Star Rating: 3 stars
The fund's strategy is to generate attractive returns through high-quality corporate bonds and short duration mandate. It employs a bottom-up approach combined with a top-down overlay to generate superior risk[1]adjusted returns. A top-down approach guides portfolio position around predetermined risk parameters by assessing gross domestic product/inflation, monetary/fiscal policy, interest rate, liquidity, yield curve, credit spread, and so on, while the intensive bottom-up credit research uses an in-house model for security selection.
The managers use various qualitative and quantitative parameters and put a lot of emphasis on a company's management, business, and financial health. They also use the analysis of sell-side research and credit[1]rating agencies to form a view on the creditworthiness of companies but to a limited extent. The credit committee then reviews the rated securities, and the approved securities are assigned credit and tenor limits. While constructing the portfolio, the managers have the flexibility to implement the trades with reasonable leeway to express their views. The risk-management team periodically reviews the portfolio to ensure the managers adhere to the guidelines. We believe the flow of ideas/information is effective and fits nicely with the process in place, supporting an Above Average Process rating.
SBI SHORT TERM DEBT
- Analyst Rating: Bronze (Direct), Neutral (Regular)
- Category: Short Duration
- Star Rating: 4 stars
The fund's strategy is to generate attractive returns through high-quality corporate bonds and short duration mandate. It employs a bottom-up approach combined with a top-down overlay to generate superior risk[1]adjusted returns. A top-down approach guides portfolio position around predetermined risk parameters by assessing gross domestic product/inflation, monetary/fiscal policy, interest rate, liquidity, yield curve, credit spread, and so on, while the intensive bottom-up credit research uses an in-house model for security selection.
The managers use various qualitative and quantitative parameters and put a lot of emphasis on a company's management, business, and financial health. They also use the analysis of sell-side research and credit[1]rating agencies to form a view on the creditworthiness of companies but to a limited extent. The credit committee then reviews the rated securities, and the approved securities are assigned credit and tenor limits. While constructing the portfolio, the managers have the flexibility to implement the trades with reasonable leeway to express their views. The risk-management team periodically reviews the portfolio to ensure the managers adhere to the guidelines. We believe the flow of ideas/information is effective and fits nicely with the process in place, supporting an Above Average Process rating.
SBI MAGNUM MEDIUM DURATION
- Analyst Rating: Neutral
- Category: Medium Duration
- Star Rating: 5 stars
The fund's strategy is to take slightly higher credit risk while minimising interest-rate exposure. It invests across the capital structure with a bottom-up investment process and applies a combination of quality and liquidity filters to its universe. This helps eliminate speculative companies with excessive debt or negative earnings.
The managers use various qualitative and quantitative parameters and put a lot of emphasis on a company's management, business, and financial health. They also focus on the covenants in detail, which helps protect from downside scenarios. They also use sell-side research and credit-rating agencies to form a view on the creditworthiness of companies, but to a limited extent. The credit committee then reviews the rated securities, and the approved securities are assigned credit and tenor limits. While constructing the portfolio, the managers have the flexibility to implement trades with reasonable leeway to express their views.
A top-down approach guides portfolio position around predetermined risk parameters by assessing gross domestic product/inflation, monetary/fiscal policy, interest rate, liquidity, yield curve, credit spread, and so on, while the intensive bottom-up credit research uses an in-house model for security selection. The risk-management team periodically reviews the portfolio to ensure the managers adhere to the guidelines. The flow of idea/information is effective and fits nicely with the process in place. Despite the change in guard, execution has been good, even during the recent credit crisis.
Oct 2022: Nehal Meshram analyses credit risk funds
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Sep 2021: Nehal Meshram on why these 2 large-cap funds get a bronze
May 2021: Nehal Meshram on 3 ICICI Prudential funds
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