Manish Banthia says the CA model helps take duration calls according to economic cycles, without letting behavior influence the structure too much.
What is your outlook on interest rates in India?
We see inflation remaining benign and macro-economic factors supportive for the central bank to continue its accommodative stance in the near future. Also, earlier rate cuts may get transmitted in bond yields in the near term leaving scope for yields to fall further.
What is your framework of taking a duration call?
The Fund uses an in-house Current Account (CA) model to take duration calls. The model indicates the CA index levels vs. historic average, a positive index indicates opportunity in duration and vice-versa. The fund will start increasing its duration when CA index starts moving into positive territory and will reduce its duration when CA index starts moving into negative territory.
What is your framework of taking a credit call?
The Fund intends to invest in fixed income securities having good credit quality and reasonable secondary market liquidity. The fund will predominantly invest in high rated Corporate Bonds and Government securities.
In your view, how should a long-term fixed income investor optimise his returns?
Among the whole roster of debt funds, investors should invest such that the portfolio can benefit from interest rate cycles through duration funds as well as focus on yield to maturity and accrual incomes through accrual funds in order to generate better risk adjusted returns.
What will you attribute the above average performance to?
The model of this fund helps to stay on course as it increases duration when economic cycles turn bullish. It doesn't let behavior influence the structure too much.
Please click here to read the analysis of this fund.
This article was originally published on June 23, 2016.
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