3 highly rated gilt funds to consider

By Morningstar Analysts |  03-06-20 | 
 

In How to understand gilt funds, we explained the basics of such offerings. Over here, we get specific with the options available for investors.

Types of Gilt Funds as per SEBI classification

  • Gilt Funds

These funds invest at least 80% of their portfolio in G-Secs across maturities. They have the mandate to dynamically manage the duration depending upon their interest rate views.  If managers are very bearish on rates, they can reduce duration drastically and also tactically trade the portfolio when yields are volatile. Choosing a fund here is important based on the strength of the people and the process running the strategy.

  • 10-year Constant Maturity Gilt Funds

These funds invest at least 80% of their portfolio in G-Secs so as to maintain a constant maturity of 10 years. Thus, the interest rate risk will always remain a constant in these.

Gilt Funds we rate highly

Managed by Suyash Choudhary, his strength lies in his in-depth understanding of the macroeconomic environment and his ability to anticipate interest-rate movements and identify attractive investment opportunities across market segments. He is at his best investing in an unconstrained manner. Choudhary plies a free-flowing investment approach which allows him to invest across the yield curve. 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 and hold the fund in good stead.

The fund’s investment strategy is well-complemented by manager Rahul Goswami’s experience in managing duration strategies. We think he ranks among the best in the industry on the duration- management front and is ably supported by Anuj Tagra. Goswami analyses the macroeconomic scenario to predict the direction of interest rates. The interest-rate call, shape of the yield curve, and anticipation of yield-curve movements form the basis of portfolio positioning. Spread analysis is integral to the strategy, as Goswami has regularly found opportunities in less-travelled corners of the gilt segment such as state government bonds. He is focused mainly on medium- to longer-term trends but has displayed an ability to combine them with shorter-term cyclical considerations to build portfolios that are well-positioned to take advantage of all market conditions. We believe his caliber and research-intensive approach are well-suited to such moves and makes the fund a suitable choice in the Gilt Fund space.

The investment process is based on the team’s ability to combine long-term macroeconomic and market analysis with shorter-term cyclical considerations to build portfolios that are well-positioned to take advantage of mispriced opportunities across the yield curve. The core part of the portfolio is aligned towards the long-term view of the fund, while the tactical part is more liquid and is used to enhance the running yield of the portfolio. The robust investment process, experienced team and manager in Abhishek Bisen and the lower expense ratio lead us to maintain a positive stance on the fund.

Also Read:

A gilt fund must never be a core holding

How to build a debt portfolio

What debt funds are not

How to understand gilt funds

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