IDFC SSI Medium Term Plan

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We like this fund for its performance consistency in the past 3 years. At present, the fund is predominantly invested in medium tenure corporate bonds and is all ready to gain from any interest rate cuts.

 

Strategy

This fund predominantly focuses on corporate bonds with short-to medium-term maturities and can hold a portfolio with an average maturity of up to four years. An actively-managed debt fund, the fund manager manages to align the portfolio based on the interest rate movements. For instance, the fund manager is prepared for the anticipated rate cuts, which would give investors capital gains in addition to interest payout.

 

The fund manager predominantly invests in high quality paper and top-rated securities. AA rated instruments account for a very small portion of the portfolio, which reduces the risk of prices correcting if the spreads between top-quality paper and lower-rated bonds widen. Its liquidity is also high which could handle redemption while reducing impact cost. Preference to investments in CDs and debentures, bonds and Government securities in 2012 has helped this fund's assets go up to Rs 2,220 crore.

 

Performance

This fund is designed as a medium-term investment option and most often has a medium-term maturity profile. It has provided stable returns over a relatively medium tenure period. It has outperformed the category average in 6 out of 8 years and did exceedingly well in 2009, when it posted 6 per cent returns when most other funds had negative returns. The 2008 momentum helped it do better than peers and category average in the subsequent years.

 

This fund has a high portfolio turnover due to active management which has worked historically. However, high turnover may increase the portfolio risk as constant churning can also result in wrong calls. So far, this fund has compensated investors for the risk that it poses due to high churning. The portfolio has an average maturity in the range of 2 days to 5.47 years and it has not crossed 4 years in this year.

 

Why invest?

This fund generates stable returns with a low risks in a portfolio of good quality fixed income and money market securities. The expense ratio of below 1.50 per cent adds to the returns, making it a compelling pick.

Happy Investing!!

We can help. Call 0 94 8300 8300 (India)

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You can write back to us at PrajnaCapital [at] Gmail [dot] Com

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