Morningstar: Mutual Fund Guide

HDFC Short Term Debt

Investment Strategy

HDFC Short Term Debt benefits from seasoned manager Anil Bamboli’s investment style, which focuses on keeping risks at bay. Bamboli’s investment approach is reasonably simple and straightforward with an emphasis on safety and liquidity.

Manager Anil Bamboli seeks to add value through security selection rather than taking duration bets as it is typically maintained within the fund’s defined investment mandate. 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 in which the focus is to get a measure of the company’s creditworthiness. The team studies the company’s cash flow and relevant ratios-leverage, coverage, and solvency. At this step, the team also draws on the expertise of their counterparts in the 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 helps 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 as a whole.

The portfolio bears out that the manager has typically invested in highly rated (often AAA) paper of strong and stable private sector companies and paper issued by public-sector undertakings. The credit bets are taken tactically and are capped at 20% of the portfolio.

Nippon India Large Cap Fund

Manager Biography And Fund Strategy

Sailesh Raj Bhan has been managing this fund for over 13 years. He is a seasoned manager, and over the years he has gained considerable experience running a variety of strategies. This fund benefits from his disciplined investment approach, and the strategy jells well with his skill set.

Sailesh Raj Bhan plies a growth-a-ta-reasonable-price strategy. Typically, he prefers companies with healthy or rising returns on equity. He does not mind paying more for a stock if he believes it has sustainable advantages and good growth prospects. But that is not to suggest he is indifferent to valuations. Bhan pays heed to qualitative issues when evaluating a company. He uses fundamental research to scout for companies with sustainable business models, strong management teams, and durable competitive advantages. The top-down approach isn’t ignored as factors such as interest rates and currency movement are considered, especially while investing in sectors such as technology, healthcare, and financial services. Sell-side research is used in the large-cap space, whereas the analyst team puts more emphasis on tracking small/mid-cap stocks. Bhan’s free-flowing investment approach and his willingness to be patient with his high conviction yet underperforming holdings contribute to this being a
unique process.

While traditionally the manager has stayed clear of investing in small caps, the allocation to mid-cap stocks has hovered in the range of 10%-20%. Bhan is benchmark-aware, but he takes reasonable sector deviations if his top-down view suggests so.

UTI Value Opportunities Fund

Manager Biography And Fund Strategy

The fund is jointly managed by Vetri Subramaniam and Amit Premchandani. Subramaniam who is an experienced and skilled manager started managing this fund in February 2017, while Premchandani started managing here in February 2018.

The fund has more flexibility to position itself actively across the market-cap spectrum and has a value bent. Vetri Subramaniam follows a mix of top-down and bottom-up approaches while taking aggressive sector positions. The positioning is based on valuation considerations and medium-term growth prospects. The initial quantitative screening process identifies companies that have generated higher operating profits and demonstrated long-term ROE. For the qualitative aspect, he focuses mainly on management quality, the company’s business model, and competitive advantages. While selecting securities from the existing universe of 315 stocks, Subramaniam follows a barbell strategy and invests in growth companies even at a premium if he believes the valuations are reasonable and the company has the potential to generate economic value through the cycle. He is also willing to operate on the other side of the spectrum--with the potential for mean reversion in valuation. According to the manager, the value in the portfolio is buying stocks at less than their intrinsic value. He invests in stocks that are currently depressed with low ROCE/ROE and have the potential to generate higher returns.

Taking cash calls is not part of the strategy. While the fund may court significant volatility at times because of its value bent and increased exposure in the small/mid-cap space, its low fees, deep research, and strong investment team should hold the fund in good stead.