IDFC Bond Fund – Short Term Plan
Any investment decision has to be part of a holistic asset allocation framework. Our best one is to talk of fixed income allocations under three buckets of liquidity, core, and satellite. The ‘core’ bucket should typically hold the bulk of fixed income allocations for the investor, it should always control for both duration and credit risk (predominantly AAA front end products). Liquidity bucket is for very short term parking of surplus or as your emergency corpus. Satellite bucket whereas is an aggressive/high risk allocation where credit, quasi credit and active duration would fit in.
Our approach to Core bucket is - invest for Safety (high quality portfolios, predominantly in AAA), Liquidity and relatively stable return. IDFC Bond Fund- Short Term Plan fits well into the core bucket with a constrained duration and constrained credit strategy.
IDFC Bond Fund- Short Term Plan is positioned in the ‘Short Duration’ category of SEBI’s scheme classification. It is an open ended short term debt scheme investing in instruments such that the Macaulay duration* of the portfolio is between 1 year and 3 years. The fund is currently positioned such that the average maturity of the portfolio is anchored around 2 years – thereby constraining the duration risk of the product. Further, the fund focuses on maintaining high quality portfolio predominantly in AAAs thereby controlling the credit risk constraint. These two aspects therefore make it an ideal fitment into the ‘core’ allocation of the portfolio. (*The Macaulay duration is the weighted average term to maturity of the cash flows from a bond. Source: Investopedia)
This fund is typically suitable for investor with 1year+ horizon and/or for a conservative investor. The inflation indexation benefit, however, kicks in if the investment horizon exceeds 3year. Most likely the fund will offer relatively better post-tax returns in a 3yr+ horizon as compared to a Fixed Deposit (FD). However, unlike FD it cannot guarantee any fixed return.
Current Portfolio Quants: (As on 31st July 2019)
Average Maturity: 2.15 years
Modified Duration: 1.82 years
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
The Disclosures of opinions/in house views/strategy incorporated herein is provided solely to enhance the transparency about the investment strategy / theme of the Scheme and should not be treated as endorsement of the views / opinions or as an investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document has been prepared on the basis of information, which is already available in publicly accessible media or developed through analysis of IDFC Mutual Fund. The information/ views / opinions provided is for informative purpose only and may have ceased to be current by the time it may reach the recipient, which should be taken into account before interpreting this document. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision and the security may or may not continue to form part of the scheme’s portfolio in future. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. The decision of the Investment Manager may not always be profitable; as such decisions are based on the prevailing market conditions and the understanding of the Investment Manager. Actual market movements may vary from the anticipated trends. This information is subject to change without any prior notice. The Company reserves the right to make modifications and alterations to this statement as may be required from time to time. Neither IDFC Mutual Fund / IDFC AMC Trustee Co. Ltd./ IDFC Asset Management Co. Ltd nor IDFC, its Directors or representatives shall be liable for any damages whether direct or indirect, incidental, punitive special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information.