SOME MORE INTERESTING ANALYSIS OF FORTIS FLEXI DEBT DURING VOLIATILE DEBT MARKET IN YEAR 2008
Inspite of many reassurances by RBI on raising funds for the Govt borrowing programme without disrupting the debt markets, there seems to be no respite on the yields from rising up. Though most of the times, auction has been preceded by OMOs (generally Rs.6000 crs of OMO followed by Rs.12000 crs of Auctions), the same seems to have no impact on yields spiking up on auction dates.
Currently (on the day of the auction of Rs.12000 crs) 10 year benchmark yield has once again inched up to 7.20%. Government has already completed Rs.2.37 lac crore (out of total net borrowing for the first half of Rs.2.99 lac crs). Gross borrowing programme was pegged at Rs.4.50 lac crs. Most of the borrowing programme was front loaded i.e. 2/3rds of the total borrowing has to be completed in the first half of the year. Hence, only Rs.1.51 lac crs will be left to be borrowed in the second half of the borrowing calendar.
If RBI continues to hold OMOs of similar amounts of 50% of the auction amount (they have already conducted OMOs till August 20’2008 of Rs.41,850 crs) ; OMOs going forward will have much more positive impact on the yields ( assuming the weekly auctions come off from Rs.12000 crs).
I had recommended investment in Fortis Flexi Debt on July 29’2009. The said scheme is also posting negative returns for the past 19-20 days or so & hence, I thought of re-analyzing their performance over various time horizons in 2008 when inflation went thru the roof & 10 year benchmark also started going up exponentially.
Let me put things in perspective of the debt market journey in 2008:
10 year was @ 7.87% & Inflation was at 3.65%
10 year after touching 7.29% in January 2008 inched up to 7.51% & inflation inched up to 4.89%:
|
Fund Name |
From Date |
To Date |
Days |
Annualised |
| Fortis Flexi Debt |
07-Dec-07 |
15-Feb-08 |
70 |
12.46 |
| ICICI Prudential Income Fund – IP |
07-Dec-07 |
15-Feb-08 |
70 |
21.09 |
| HDFC Income |
07-Dec-07 |
15-Feb-08 |
70 |
17.02 |
| Templeton India IBA – Plan A |
07-Dec-07 |
15-Feb-08 |
70 |
25.37 |
| Birla Sun Life Income Plus |
07-Dec-07 |
15-Feb-08 |
70 |
24.19 |
Inflation went up to 12.44% & 10 year shot up to 9.32%
|
Fund Name |
From Date |
To Date |
Days |
Annualised Return |
| Fortis Flexi Debt |
07-Dec-07 |
31-Jul-08 |
237 |
9.00 |
| ICICI Prudential Income Fund – IP |
07-Dec-07 |
31-Jul-08 |
237 |
1.94 |
| HDFC Income |
07-Dec-07 |
31-Jul-08 |
237 |
0.58 |
| Templeton India IBA – Plan A |
07-Dec-07 |
31-Jul-08 |
237 |
0.93 |
| Birla Sun Life Income Plus |
07-Dec-07 |
31-Jul-08 |
237 |
5.33 |
10 year after touching a high of 9.32% settled down to 6.76% & inflation (after touching 12.44% in end July) settled down at 6.84%
|
Fund Name |
From Date |
To Date |
Days |
Annualised Return |
| Fortis Flexi Debt |
07-Dec-07 |
05-Dec-08 |
364 |
13.77 |
| ICICI Prudential Income Fund – IP |
07-Dec-07 |
05-Dec-08 |
364 |
16.64 |
| HDFC Income |
07-Dec-07 |
05-Dec-08 |
364 |
7.76 |
| Templeton India IBA – Plan A |
07-Dec-07 |
05-Dec-08 |
364 |
2.79 |
| Birla Sun Life Income Plus |
07-Dec-07 |
05-Dec-08 |
364 |
12.86 |
10 year went up from 7.51% (February 15’2008) to 9.32% (July 31’2008) & inflation went up from 4.89% to 12.44%
|
Fund Name |
From Date |
To Date |
Days |
Annualised Return |
| Fortis Flexi Debt |
15-Feb-08 |
31-Jul-08 |
167 |
7.37 |
| ICICI Prudential Income Fund – IP |
15-Feb-08 |
31-Jul-08 |
167 |
-5.84 |
| HDFC Income |
15-Feb-08 |
31-Jul-08 |
167 |
-6.11 |
| Templeton India IBA – Plan A |
15-Feb-08 |
31-Jul-08 |
167 |
-8.88 |
| Birla Sun Life Income Plus |
15-Feb-08 |
31-Jul-08 |
167 |
-2.46 |
10 year came down from 7.51% to 6.17% & inflation came down from 4.89% to 3.36%
|
Fund Name |
From Date |
To Date |
Days |
Annualised Return |
| Fortis Flexi Debt |
15-Feb-08 |
13-Feb-09 |
364 |
16.24 |
| ICICI Prudential Income Fund – IP |
15-Feb-08 |
13-Feb-09 |
364 |
16.86 |
| HDFC Income |
15-Feb-08 |
13-Feb-09 |
364 |
9.73 |
| Templeton India IBA – Plan A |
15-Feb-08 |
13-Feb-09 |
364 |
2.57 |
| Birla Sun Life Income Plus |
15-Feb-08 |
13-Feb-09 |
364 |
13.88 |
All the above results were achievable due to active reallocation by the Fund Manager between a) duration & b) between G Sec, Corporate Debt & Money Market instruments. Following table will indicate the ever-changing duration & investment profile based on the Fund Manager’s view over the past one year on Month on Month basis:
|
|
G-Sec |
Corporate Debt |
Money Market |
C/CE |
Total |
|
Jul-08 |
0 |
31.17 |
68.39 |
0.44 |
100 |
|
Aug-08 |
0 |
57.91 |
41.38 |
0.71 |
100 |
|
Sep-08 |
6.71 |
85.97 |
11.47 |
-4.14 |
100 |
|
Oct-08 |
13.87 |
86.36 |
3.07 |
-3.29 |
100 |
|
Nov-08 |
19.41 |
27.57 |
50.78 |
2.24 |
100 |
|
Dec-08 |
55.7 |
34.72 |
9.33 |
0.25 |
100 |
|
Jan-09 |
93.93 |
43.33 |
7.31 |
-44.57 |
100 |
|
Feb-09 |
40.68 |
56.73 |
0.55 |
2.03 |
100 |
|
Mar-09 |
43.92 |
54.01 |
0.22 |
1.86 |
100 |
|
Apr-09 |
50.6 |
43.16 |
0.04 |
6.2 |
100 |
|
May-09 |
47.54 |
46.35 |
2.25 |
3.86 |
100 |
|
Jun-09 |
47.24 |
38.85 |
52.82 |
-38.9 |
100 |
|
Jul-09 |
73.46 |
11.88 |
14.47 |
0.19 |
100 |
As can be seen from above, debt markets during these periods were extremely volatile with huge upward tick to both inflation & 10 year yields. Inspite of this Fortis Flexi Debt (due to the Fund Manager’s strategy of constantly changing duration based on his views on the interest rate movements) posted hugely positive returns in all the above time horizons.
Hence, I would advise you to be patient & stay invested (or add on more at current levels) for the required duration of 6-12 months for you to have the extra alpha in your portfolio based on the Fund manager’s expertise.
Leave a Comment