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Kotak Savings Fund: Fund seeks to deliver returns via accrual income

The experienced investment committee’s presence is helpful and makes the investment process more holistic

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Kotak Savings Fund (formerly known as Kotak Treasury Advantage) is managed by Deepak Agrawal, a highly experienced manager. Agrawal has a flair for managing credit strategies, which has been exhibited in his more than 15-year stint with Kotak. Agrawal is well supported by an eight-member investment team that includes the head of fixed income, Lakshmi Iyer. The manager primarily invests in high quality credits, mainly AAA rated instruments. 

Investment strategy

The fund is positioned to deliver returns via accrual income rather than duration plays. Hence, credit selection and spread analysis are the main sources of excess return, and the focus is on identifying mis-priced money market instruments and bonds with strong credit fundamentals. 

The investment process is consistent, with economic, credit, and liquidity analysis used to determine the fund strategy. Credit analysis is divided into banking, non-banking financial companies, and manufacturing debt, and they are further demarcated into three buckets based on the strength of the business, management, and corporate governance standards. 

The team leverages on the expertise of the equity team at Kotak AMC and Kotak Bank. The qualitative assessment is then followed by rigorous quantitative analysis, wherein financial ratios such as leverage, coverage, and solvency ratios are considered. While constructing the portfolio, the manager follows a proprietary model to determine the exposure that he can take in each issuer. An independent risk management team ensures the limits are being adhered to. The manager conducts regular client profiling to understand their liquidity requirements and investment horizon. The experienced investment committee's presence is helpful and makes the investment process more holistic. 

To enhance the portfolio yield, the manager takes around 15%-20% allocation in sub-AAA rated securities and rarely goes below AA, provided he gets approval from the investment committee. The manager invests in lower rated credits but only if he is convinced in the company's management and the promoter group's financial strength.

Trailing returns

The fund has outperformed the benchmark over the one, three, five and 10-year periods. 

Portfolio composition

Some companies the fund has invested in are Nabha Power, REC, Indusind Bank, ONGC Mangalore Petrochemicals, PFC, L&T Finance, SIDBI and Bahadurchand Investments.

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