PROMISES DELIVERED : AXIS STP
Axis STP NFO closed on January 20’2010. Theme of the NFO was to capture:
- Higher accrual
- Capture attractive spreads between 1 & 5 year corporate bonds; which were at historical highs
- Compression in CD/CP portfolio post March ‘2010
- Roll down effect
Initially the Fund Manager created a portfolio of 50:50 of 2-5 year corporate bonds v/s CD & CPs of less than one year maturity by creating an average maturity of 1.75 years & capturing gross yield of 6.29%.
Thereafter, the Fund Manager took advantage of tightness of liquidity impacting short end of the curve by reducing exposure from 2-5 year corporate bonds from 50% to 30% & increasing exposure to 1 year CD to 70%. Yields in 1 year CDs had gone upto close to 7% levels. Said portfolio already had built in profits as one year CD rates post their investment had already started compressing to below 6.40% levels.
Since CDs valuation was done on accrual basis rather than MTM, NAV appreciation did not register this unrealized gain till recently. Currently the Fund Manager has booked profit on 50% of their 70% portfolio invested in CDs at levels between 6.15-6.30%. Hence, he is sitting on almost 35% of portfolio in cash & cash equivalents, 35% still in 1 year CDs, 30% in 2-5 year Corporate Bonds generating decent returns from various dates as shown below. From the time of his original investments on March 20’2010, 2-5 year corporate bonds have inched up by over 25 bps over last 3 months (which is getting reflected in slightly lower; though positive returns since inception).
The Fund Manager is now waiting for an opportunity to increase his portfolio in 2-3 year corporate bonds (which is still quoting between 7.20 to 7.55% & likely to inch up if there are rate hike announcements in April Credit Policy Review) & create higher average maturity & capture higher gross yield. The said portfolio should do well once, first half borrowing calendar gets completed & inflation trajectory starts coming down from August onwards due to base effect kicking in.
Kindly wait for the latest update on the said scheme post the Credit Policy Review to increase exposure to the said scheme with six month investment horizon.
Returns in the said scheme on various dates of our notes/recommendations till April 13’2010:
|
Mutual fund |
Date |
Current Date |
Period |
% Return |
|
Axis Short Term Fund |
20-Jan-10 |
13-Apr-10 |
84 |
4.54 |
|
Axis Short Term Fund |
28-Jan-10 |
13-Apr-10 |
76 |
4.46 |
|
Axis Short Term Fund |
18-Mar-10 |
13-Apr-10 |
27 |
6.28 |
Comments
Kindly recommend when can exposure to the Axis Short Term Fund can be taken next with the changes in the investment strategy of the Fund Manager.
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