Morningstar: Mutual Fund Guide

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Morningstar: Mutual Fund Guide
Morningstar: Mutual Fund Guide
Morningstar India - 05 June 2021

Kotak Medium Term Fund

Investment Strategy

“Manager Deepak Agrawal has a flair for managing credit strategies, which has been exhibited in last 17 years with Kotak AMC. He is well supported by a nine-member investment team, including head of fixed income Lakshmi Iyer.

The fund house has a fairly tight structure in place to evaluate the credit matrix and take a transaction-based approach while deciding on investments. The fund maintains duration of 3.0-4.0 years and invests primarily in good quality high-yielding assets. The manager seeks to identify duration bets through macroeconomic factors by incorporating views of internal and external economists. Credit analysis is divided into banking, NBFC, and manufacturing debt, then further demarcated into three buckets based on business strength, management, and corporate governance standards. Surveillance has shot up after the recent spate of downgrades. The team also keeps a check on the sponsor debt and evaluates asset liability profiles on a monthly basis. The team leverages the expertise of the equity team at Kotak AMC and Kotak Bank. It is then followed by rigourous quantitative analysis, wherein key financial ratios are considered. Deepak Agrawal follows a proprietary model to determine the exposure limit, and the risk-management team ensures the limits are being adhered to. The manager conducts regular client profiling to understand their liquidity requirements. The presence of the investment committee makes the process more holistic. The manager runs the strategy with low to moderate duration and focuses on higher accrual income by investing in high-yielding assets. The fund is well-diversified, with around 50-55 securities. The fund typically maintains 30%-40% in AAA, 40%-60% in AA, and 10%-30% in A instruments. To maintain liquidity, the manager ensures at least 35% of assets are in instruments with less than one-year maturity”

ICICI Prudential Multi Asset Fund

Manager Biography And Fund Strategy

Fund Manager Sankaren Naren has proved himself an astute portfolio manager with his ability to think differently and pick stocks that have the potential to generate higher returns. He is backed by comanager Ihab Dalwai and a highly cohesive investment team, contributing unique investment ideas that are debated rigorously.

The fund invests at least 10% across the three asset classes: equity, debt, and REITs/gold. The fund follows a disciplined investment process and an active portfolio management approach. Lead manager Sankaran Naren follows an aggressive contrarian strategy and is willing to buy companies that are in the midst of a short-term crisis or transitions but remain fundamentally sound. He continues to dynamically manage the equity and debt portion based on market valuation and maintains the gross equity level of 65%. Taking cash calls is integral to the strategy, but in recent times the manager has not gone beyond 15%. The manager evaluates sectors from a top-down perspective, favouring those with attractive fundamentals and shifting away from ones where he thinks valuations are stretched. He studies factors such as fiscal policy, current account deficits, inflation, economic growth rate, and government policies to form his top-down views. While picking stocks, he makes use of relative valuations to invest in large-cap stocks and knocks out stocks with high leverage.

The fund’s long-standing process is research-based with a mix of top-down and bottom-up styles. Naren deploys a rule-based approach using the historical price/book value of the market to determine fair value and tweak cash allocations. It has currently maintained 10% in gold and intends to keep it in the 10%-25% range.

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