Aditya Birla Sun Life Treasury Optimizer Plan won the Morningstar award in the Intermediate Bond Fund category. The other two nominees were ICICI Prudential Income Opportunities and Kotak Flexi Debt.
Maneesh Dangi, Co-Chief Investment Officer at Aditya Birla Sun Life Mutual Fund shares a few thoughts.
What has helped in the consistent performance of the Aditya BSL Treasury Optimizer Plan?
This fund has used a blend of duration and accrual strategy by investing predominantly in Government Bonds and AAA & equivalent rated corporate bonds with modified duration ranging between 2-3 years.
To contain volatility in the portfolio, currently have followed a discipline of (i) Restricting its exposure to central government dated securities (ii) Limiting the exposure to corporate bonds whose maturity exceeds 5 years to those opportune times when we wish to take any dislocation in the yield curve.
How do you plan to sustain its performance going ahead?
As we have highlighted earlier we look at opportunities on the yield curve and evaluate these against the potential risks like liquidity, credit and duration risks. At this juncture the near end high quality presents a very good opportunity both in absolute and relative sense. We intend to build the nucleus of the portfolio on this while taking tactical call in the periphery of the portfolio.
What parameters should investors and advisers look at while shortlisting a short-term fund?
The primary parameters which investors should first look at is their own appetite for volatility and their expected investment horizon. For an expected investment horizon of 3m to 1y a short term fund is an ideal investment vehicle. Investors should also keep in mind the credit profile of the fund and in case of large investors the liquidity profile of the fund also becomes an important variable.
What are your thoughts on the more hawkish monetary policy stance going ahead?
While monetary policy stance has been neutral there has been some fear of rate tightening in markets, however we must deliberate on whether these are fairly priced by the markets. At this juncture we feel that overall curve in general and more specifically 0-3y corporate bonds are more than adequately priced in the risks of rate hike. We should also emphasise that given our understanding of various macro-economic we feel that RBI will remain on prolonged pause. Given this context this segment of the market has become very attractive as it offers both encouraging valuation and sharp decay in risk to guard against any unforeseen events.
What categories of funds would you advise investors to look at this juncture?
Valuations have been attractive across the curve. However in recent times we have seen high volatility in duration segment. Hence for investors with low appetite for volatility we would advise them concentrate on short duration funds which primarily cater to corporate bond in the 1-3y segment.
