Wary of interest rate swings? Bet on Axis FoF

Retail investors confused about which debt mutual fund to pick could opt for the Axis Mutual Fund’s All Seasons Debt Fund of Funds. It invests in other debt mutual fund schemes chosen from the top 10 fund houses, with large assets and a good track record.“It is difficult for retail investors to move from one scheme to another based on changing interest rate scenarios or to time the market. In this scheme, the fund manager generates alpha by capturing spread between AAA and lower rated / unrated paper, low and high duration and can move the portfolio fast in case of any change in interest rate scenario,” says Rupesh Bhansali, head (distribution), GEPL Capital. He said the scheme lowers risk because of the investment mix across fund houses and removes the tax hassles involved in shifting from one debt fund to another.The scheme is a mix of 14 debt mutual funds across different fund houses with 34% allocation to credit risk, 18% to medium duration funds and the balance in a mix of ultra-short-term and long corporate bond funds. 84540240“Allocation to credits is a macro-driven trade, wherein we believe that credit cycle will remain an attractive play for investors with a 3-5-year investment horizon as an improving economic cycle and liquidity support assuage credit risk concerns, especially in higherquality names,” said Devang Shah, co-head, fixed income, Axis Mutual Fund. By using ultra-short and longduration corporate bond funds, the fund manager is following a barbell strategy. The ultra-short holdings in the portfolio help play the reinvestment trade while limiting the impact of markto-market (MTM) as yields rise.In the past one year, the fund has returned 6% higher than the dynamic bond fund category that returned 3.67%. The top three holdings in the fund are HDFC Low Duration, Axis Credit Risk and HDFC Credit Risk Fund.The shortcoming of the fund is that it is more expensive than plain-vanilla debt schemes. Fund of funds cost more to investors as they have to pay an additional expense for the underlying funds. This fund alone charges 22 basis points in the direct plan 52 basis points in the regular plan.

from Economic Times https://ift.tt/3xOL1xF