Morningstar: Mutual Fund Guide

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Morningstar: Mutual Fund Guide
Morningstar: Mutual Fund Guide
Morningstar India - 01 March 2021

Kotak Bond Short Term

Investment Strategy

Manager Deepak Agrawal has a flair for managing credit strategies, which has been exhibited in his 17 years with Kotak AMC. Agrawal is well-supported by a nine-member investment team that includes the head of fixed income Lakshmi Iyer. Her presence is a big positive, and her contribution gives the team an edge.

The process is research-based with an emphasis on safety and liquidity. The fund is more focused on taking small-duration bets and invests primarily in high-quality credits. The manager seeks to identify duration bets through macroeconomic factors, by incorporating the views of internal and external economists. Credit analysis is divided into banking, non-banking financial companies, and manufacturing debt and further demarcated into three buckets based on the strength of the business, management, and corporate governance standards. The team keeps a check on the sponsor debt and evaluates asset-liability profiles monthly rather than quarterly. It also leverages the expertise of the equity team at Kotak Mutual Fund and Kotak Bank. The qualitative assessment is then followed by rigorous quantitative analysis, wherein financial metrics such as leverage, coverage, and solvency ratios are considered. The manager follows a proprietary model to determine the exposure in each issuer.

Deepak Agrawal invests in corporate bonds, government securities/state development loans, and money market instruments. The fund aims to keep 75-80 per cent of assets in AAA corporate bonds and invests in PSU and quality private names.

Franklin India Smaller Companies Fund

Manager Biography And Fund Strategy

R Janakiraman has been managing this fund since February 2011. Being a designated small/mid-cap specialist with the fund house, Janakiraman is conversant with the risks associated with investing in this segment.

Fundamental research forms the crux of the investment process. The coverage list for small/mid-caps is built by the portfolio managers in conjunction with the analysts. When selecting companies, the investment team places a strong emphasis on qualitative aspects such as managerial strengths and corporate governance standards; also, rigorous business analysis is performed to understand the growth prospects of the industry, its competitive landscape, entry barriers, the company’s market share, and scalability prospects of the business, among others. Analysts construct sector-based model portfolios comprising the best ideas from stocks in their investment universe, which in turn is compiled by the research head to construct a diversified small/midcap portfolio. Janakiraman uses this model portfolio as his initial reference point, and he selects companies that can generate consistent and sustainable earnings growth over a business cycle, have low leverage, and have reasonably high ROEs. He uses historical five-year data as a yardstick to project five years ahead.

Large-caps account for 15 per cent and are mainly for managing liquidity. Janakiraman’s benchmark-agnostic approach coupled with bottom-up stock-picking results in a portfolio that is distinct from the benchmark index or peers. The fund can experience bouts of extreme volatility during market downturns and may witness a prolonged underperformance when small-cap segment hits a rough patch.

IDFC Sterling Value Fund

Manager Biography And Fund Strategy

Anoop Bhaskar has been managing this fund since April 2016. His experience in managing funds from the large and mid/small-cap variety with the same degree of success speaks volumes about his management capabilities.

Bhaskar runs the fund using a relative valuation strategy rather than absolute valuation. Therefore, while the valuation is the premise of the investment approach plied here, the fund doesn’t qualify as a true-blue value fund. Bhaskar looks at three attributes for evaluating a stock on valuation--price/earnings, price/book, and enterprise value/sales--over a trailing 12-month period. A stock qualifies on his valuation expectation if two out of these three attributes are lower than the industry average. While investing, he tries to understand long-term trends and pick fundamentally sound companies, having monopolistic presence, at early stages and that have a competitive advantage in their respective spheres. He prefers companies that have decent amount of promoter holdings, good cash generation, and low leverage and businesses that are profitable over a cycle. He avoids businesses that show profitability in spurts. Although he believes in playing the entire business cycle in an issue, he can skillfully deploy tactical plays as well to capitalise on short-term opportunities. Sell-side research is extensively used, and the in-house team builds its investment thesis on that.


Bottom-up stock-picking is evident, and the top-down approach isn’t ignored. The manager doesn’t shy away from having an overweight or underweight position in sectors either from a bottom-up basis or macro perspective. Anoop prefers constructing a diversified portfolio and doesn’t believe in taking cash calls.

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