A fresh look at 5 IDFC debt funds

We revisited the debt funds managed by Suyash Choudhary and assigned Silver, Bronze and Neutral ratings.
By Himanshu Srivastava |  28-05-18

IDFC Bond Fund – Short Term Plan

  • Category: Short Term Bond
  • Fund Manager: Suyash Choudhary
  • Star Rating: 4 stars
  • Analyst Rating: Neutral
  • Credit Quality: High
  • Interest Rate Sensitivity: Limited
  • What you need to know: Competent, but not outstanding, investment
  • SEBI re-categorization: Short Duration Fund

Suyash Choudhary has helmed this fund since March 2011. With experience in portfolio management spanning over 16 years, he is an accomplished and seasoned manager in running duration strategies. His strength lies in his in-depth understanding of the macroeconomic environment, and his ability to anticipate interest rate movements and identify attractive investment opportunities across market segments such as corporate bonds and government securities. He is at his best while investing in an unconstrained manner.

The fund house has positioned this fund as a high-quality/low-risk product, which necessitates limiting the manager’s degree of freedom. Consequently, there are defined boundaries for the fund within which the investments are made.

For instance, the fund’s average maturity has been typically maintained between 1.5 and 2.5 years; and the strategy doesn’t permit investments in government securities, further restricting the manager’s hand. Additionally, the manager prefers staying clear of credit bets in this fund and hence invests primarily in AAA/equivalent rated securities.

Subsequently, in line with the category’s requirement, its duration would be maintained between one and three years. Hence, there won’t be much change in the fund’s broader framework or in the way it is managed.

Choudhary’s expertise is in managing funds in an unconstrained manner; that approach has held him in good stead in other funds helmed by him. Clearly the constraints here haven’t allowed him to play to his strengths. Unsurprisingly, the fund has failed to distinguish itself in a peer relative sense. On Choudhary’s watch (March 2011-April 2018), the fund has underperformed 60% of the category peers on the returns front.

Notwithstanding Choudhary’s calibre and experience, the fund’s strategy offers him limited opportunity to fully exploit his skills. We would like to see the strategy being executed better over time to be able to build conviction in the fund’s prospects.

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