Morningstar: Mutual Fund Guide

HDFC Corporate Bond Fund

Investment Strategy

Anupam Joshi joined HDFC Mutual Fund on October 2015 and has been managing it since then. Helping Joshi is a well-defined strategy and the presence of Mehrotra and Bamboli, who have carved a niche for themselves in running high-quality, low-duration strategies, which is the premise of this fund. The fund house also has three credit analysts, and two dealers who also contribute to the research.

Manager Joshi seeks to add value through security selection, rather than making big adjustments to the fund’s duration. Expectedly, the investment approach relies on fundamental research. It entails combining qualitative aspects with quantitative analysis. The investment team prepares the coverage list with a strong focus on the company management and track record, financial strength of the promoter group, and corporate-governance standards. Meetings with management are followed by rigorous quantitative analysis to get a measure of the company’s creditworthiness. The team studies the company’s cash flow and relevant ratios-leverage, coverage, and solvency. The team also draws on the expertise of its equity team. The fund company uses a proprietary model in which qualitative and quantitative inputs are used to arrive at a credit score for each issuer. This in turn is used to help managers determine the exposure they can take to each issuer, thereby acting as a risk-management tool for the individual portfolio and the fund company.

Joshi will build cash when there are not attractive investment opportunities and to ride out periods of volatility and uncertainty.

DSP Midcap Fund

Manager Biography And Fund Strategy

Vinit Sambre has co-managed this fund since July 2012, taking independent charge in July 2015. Sambre is a competent analyst and the dedicated small or midcap specialist with the fund house.

Vinit Sambre combines absolute and relative valuation measures when picking stocks in the small or mid-cap space. He scouts for firms with sustainable competitive advantages over their peers and dominant market shares in their industries. He also tracks company management decisions to see how they pan out. This is followed by meetings with company management. Subsequently he invests only when he is comfortable with the management’s assumptions, forecasts and its capabilities. Sambre is valuation-conscious but does not mind paying a premium for a company if it satisfies all of his investment criteria. He looks at quantitative parameters such as ROE, ROCE, P/E and P/BV vis-à-vis the intrinsic growth prospects of the company. He also invests a portion of the portfolio in companies trading well below their book values, which constitute his value picks. Here he looks for companies that are affected by poor market conditions and macroeconomic scenarios rather than deteriorating fundamentals. The top-down approach sometimes is used to increase exposure to sectors that are looking attractive on valuations and future outlook.

The strategy also involves theme-based choices where Sambre scouts for turnaround stories or those companies which are capital-expenditure-oriented and linked to overall economic growth. The exposure to cash is capped at 7.5 per cent. He believes in constructing a durable portfolio which can last many cycles and deliver performance over three, five and 10 years.

Franklin India Bluechip Fund

Manager Biography And Fund Strategy

Anand Radhakrishna, CIO of Franklin India (Equity), has been managing this fund since April 2007 and is supported by a strong and experienced investment team. The investment team comprises four portfolio managers and 12 analysts, of which five act as co-managers.

The investment process is research-intensive and relies heavily on a bottom-up approach. Portfolio managers and analysts jointly decide on the coverage list where they look for growth companies that fit their qualitative requirements. Only companies that have durable competitive advantages, sustainable business models, strong entry barriers, and good corporate governance standards are included in the coverage list. Analysts evaluate companies using discount cash flow models and quantitative parameters relevant to the sector. Sector-based model portfolios created by analysts are compiled by the research head and are combined to create market-cap-based portfolios (large, small or mid and multi-cap). Anand Radhakrishnan uses a large-cap model portfolio as his base and constructs his investment portfolio around it. He is fairly valuation-conscious and sells or underweights stocks he believes are fully valued. He does not shy away from taking big long-term contrarian bets if he believes the issue has good growth prospects, but he may face near-term headwinds. He frequently invests in beaten-down stocks or out-of-favour growth companies, especially due to external factors rather than deteriorating fundamentals.

Anand Radhakrishnan’s portfolio displays strong convictions and deviates significantly from the benchmark index and category peers both in terms of stock picks and sector weights. The cash exposure rarely accounts for more than 10 per cent of assets.