IDFC Government Securities – Investment Plan
- Category: Intermediate Government Bond
- Fund Manager: Suyash Choudhary
- Star Rating: 4 stars
- Analyst Rating: Silver
- Credit Quality: High
- Interest Rate Sensitivity: Moderate
- What you need to know: A compelling option if looking for gilt exposure
- SEBI re-categorization: No change
The most appealing aspect of this fund is its manager Choudhary and an investment strategy that jells well with his skill set. Choudhary is 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. He is at his best investing in an unconstrained manner.
The fund’s investment strategy is rather straightforward, which is to scout for opportunities in the government-bond segment. While the fund stays clear of credit risk--and to a large extent liquidity risk; what differentiates it from similar offerings is the duration play, which is a mainstay of the strategy. This is where Choudhary’s experience with duration strategies adds value. Recently, the fund house hired an economist as well who would contribute towards shaping the team’s macroeconomic view, which would be helpful for duration strategies.
Although other managers in the team are gaining fund management experience, there is a key-person risk in Choudhary, particularly in the duration strategies he runs.
Choudhary plies a free-flowing investment approach, which allows him to invest across the yield curve. Fundamental research therefore forms the crux of the strategy. He is also willing to take big bets against the norm if he believes the risk/reward is favourable. The strategy is not without risk. For instance, the strategy of freely moving across the yield curve hurt the fund’s showing in 2015 when the manager’s expectation of yields softening on the longer end of the yield curve didn’t pan out. Likewise, the penchant of taking contrarian calls can prove counterproductive as well.
Having said that, Choudhary is at home with his investment style. He adopts a long-term approach to investing and, in the process, braces himself for short-term underperformance. We believe that his skills and research-driven approach should hold the fund in good stead going ahead.
