IDFC Bond Fund Short Term had a tough 2022 as it underperformed its peers by a wide margin. The fund could muster just 3.28 per cent returns against the category median 3.8 per cent. This was mainly due to its significant exposure to a government bond maturing in 2026. So brutal was the impact of this underperformance that it pulled the fund's rating down to one star by the end of the year. What led to this underperformance? In the second quarter of 2022, when the RBI announced the first in a series of rate hikes, all debt funds took a hit. But this fund was particularly affected. It ended the second quarter of 2022 at second-last position with a loss of 0.79 per cent, managing to better the bottom performer by just 1 basis point. This was attributable to its massive allocation (an average 57 per cent during 2022) to a government bond in the 3-5 year maturity range. When the interest rates started to go up, bonds in this maturity range were among the worst hit, and so was this fund. It's not that its peers did not have investments in such bonds, but IDFC had much higher exposures - and for much longer. In fact, many funds actually started increasing investments in these bonds only in the second half of the year after their prices corrected, unlike this fund (see graph Allocation to bonds maturing in >3 years). Besides, the fund also paid the price for being quality conscious. Unlike many of its pee
Buy, hold, or switch. Get the call.
How's my portfolio doing? What do I need to fix? Where should I invest next? Fund Advisor answers each one. The Advisor Note every Saturday. A live session with Dhirendra Kumar every second Saturday.
No commissions. No conflicts. Since 1991.
See Plans
Already a subscriber ?Log In
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
