IDFC Bond Fund - Short Term Plan

Investment Strategy

Suyash Choudhary is an accomplished and seasoned manager. His strength lies in his in-depth understanding of the macroeconomic environment, ability to anticipate interest-rate movements, and skill in identifying attractive investment opportunities across the market segments.

Safety, liquidity, and fundamental research are the hallmarks of the strategy here. The strategy is structured in a way to provide returns equivalent to that of a two-year AAA corporate bond or slightly higher than a bank’s fixed deposit of the same tenure without exposing investors to unwarranted risk. The strategy aims at generating accrual income by investing in a mix of high-quality corporate bonds and money market instruments, while maintaining the fund’s duration anchored around two years.

The biggest draw of this strategy is its trait of providing investors a true fixed-income investing experience in their portfolios. For investments in corporate bonds, the team lays a lot of emphasis on the promoter group, its track record, and corporate governance standards. Suyash Choudhary will not lend to a company facing corporate governance issues. Additionally, he looks at companies’ competitive standing with regard to peers, its practices, cash flows, liquidity profile, business and financial risks, among others.

One of the unique aspects of the strategy here is its strictly defined investment mandate and management framework, which reduces its dependency on a manager’s active investment calls. Consequently, there are defined boundaries for the fund, within which the investments are made. Its modified duration is maintained between one and a half and two years.

SBI Magnum Midcap Fund

Manager Biography And Fund Strategy

SBI Magnum Midcap fund was launched in 2005 and has been managed by Sohini Andani since 2010. Andani’s extensive experience as an analyst and a research head stands out in her bottom-up approach to stock selection.

The AMC differentiates its funds based on absolute and relative return frameworks. This is an absolute return mid-cap strategy, which aims to invest in Andani’s high-conviction ideas. While being aware of valuations, the team evaluates a company’s management and focuses on stocks that can meet their threshold in terms of CAGR and a consistent ROCE over three to five years. They emphasise the management and consider the promoter’s integrity, past track record, holding in the company, and so on, and they look at investing in businesses with high entry barriers. The in-house model portfolio forms the basis for stock selection and consists of the team’s best ideas. Valuations are looked at on an absolute basis relative to the stock’s 10-year history. The fund has largely stayed oriented towards growth stocks and is focused on three- to five-year visibility. Their approach to investing in firms with a high ESG score is a positive measure towards maintaining a “clean” portfolio. The team takes a sector view as a fund house, with stock selection left to managers who could remain uninvested in sectors wherein they don’t find the right opportunities. Andani thinks the opportunity cost of investing in these stocks is high and will exit them, irrespective of the levels that they are trading at. The team avoids event-based investing (possibility of a merger/acquisition, and so on), but tends to invest in IPOs.

Andani aims to invest in firms with a relatively high risk-reward ratio. She holds about 10-15% in large-cap stocks--largely mid-cap stocks that grew into large-cap names owing to the market valuations moving up.

Andani prefers to run the fund as a diversified strategy across stocks and sectors. This approach gives the fund a cushion from the liquidity perspective.