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Betting on Safety, Liquidity and Returns

Atul Bhole and Raghupathi Acharya, say that Tata Balanced follows an active duration management approach to manage interest rate risk and generate alpha

Atul Bhole and Raghupathi Acharya, fund managers, Tata Balanced, say that the guiding principle of their debt fund management process is SLR - Safety , Liquidity & Return.

What is your approach to managing the equity portfolio of this fund?
We primarily follow the Growth at Reasonable Price (GARP) approach with a very strong bias towards quality of businesses and managements. In some instances, we also buy and hold on to exceptional quality businesses even at slightly higher valuations for longer period of time to gain from the compounding characteristic in topline and profits. The focus is on evaluation of individual companies rather than taking outsized sectoral calls. We do not take market calls and prefer to remain invested across a diverse set of companies. So most of the time one would find the equity allocation on the higher side. Large-cap and mid-cap proportion is maintained at 40-45% and 30-35% range within 75% of equity allocation. Each sector is played through a basket of 5-8 companies. Top holding is ~4-4.5% and then there is tail of 55-65 stocks to reduce concentration and to capture more opportunities.

What is your approach to managing the fixed income portfolio of this fund?
The guiding principle of our debt fund management process is SLR - Safety, Liquidity & Return. The fund mainly invests in medium to long dated liquid sovereign and higher rated corporate bonds and money market instruments. The fund follows an active duration management approach to manage interest rate risk and generate alpha , based on the prevailing macro-economic situation in the economy. Towards this, end, the fund generally keeps an overweight position on sovereign bonds as they are highly liquid. Besides, the fund takes exposure to only high quality AAA papers, avoiding exposure to lower rated debt instruments.

How often do you re-balance your debt and equity allocation?
Debt and equity are re-balanced on a dynamic basis. As we do not take market call and time to market, the equity allocation remains on the higher side. Because of dynamic re-balancing, buying on dips and profit booking at higher prices happens regularly, which helps in the long-term.

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