Fund focuses on risk control, has low expense ratio

Anupam Joshi has over 10 years of experience in research and fund management. Joshi joined HDFC Mutual Fund in October 2015 and has been managing this fund since then.

Investment Strategy

The investment philosophy is to optimise returns without taking excessive duration or credit risk. Hence, fund manager Joshi seeks to add value through security selection, rather than making big adjustments to the fund's duration. There is a strong focus on the company management and track record, financial strength of the promoter group, and corporate governance standards. Meetings with management are followed by rigorous quantitative analysis to get a measure of the company's creditworthiness. The team studies the company's cash flow and relevant ratios – leverage, coverage and solvency.

The fund company uses a proprietary model in which qualitative and quantitative inputs are used to arrive at a credit score for each issuer. This in turn used to help managers determine the exposure they can take to each issuer. Here the investment team lays more emphasis on risk control, thereby focusing on balancing safety, liquidity and return. We think the investment process is thorough and that the manager and team are at home with the process.

Trailing returns

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

Portfolio composition

As a part of corporate bond category, the fund's investment mandate is to invest at least 80% of assets in corporate bonds having AA+ and above rating. Joshi's emphasis on liquidity and risk control continues and is borne out by the fund's portfolio, where over 90% of assets are typically invested in AAA or equivalent rated securities

Considering the ongoing interest rate and macro-economic scenario, the manager is maintaining the fund's duration in the range of one to three years. The fund has a fairly low expense ratio, which makes its case even more compelling.

Some of the corporate bonds the fund has invested include Power Finance Corporation, Reliance Industries, Food Corporation of India, ONGC Petro Additions, State Bank of India, HDFC, Hudco and HDB Financial Services.