The Mutual Fund Show: Crisil’s Top Rated Debt Funds

Crisil has released mutual fund rankings for the quarter ended March across all categories. On The Mutual Fund Show this week, the rating and research firm discussed some of the top performers in bank and PSU debt, dynamic bonds, mid-term and low-term funds.

Bank and power supply

The category saw an influx of Rs 39,426 crore in the last fiscal year, with assets surging 65.5% to Rs 1.20 lakh crore in March. Growth has been driven by entries into safer credit categories since the pandemic. Over the past year, it has also been in the top performing debt categories, with one-year yields of 7.53%.

The DSP Banking and PSU Debt funds maintained their overall ranking in the category. The big driver, however, is the Sundaram Banking and PSU Debt fund, which has climbed the charts in the overall rankings from 5th to 2nd place. Its performance is better than the category average over the past three months. In fact, the fund generated 0.73% gains in the quarter, the highest of any plan in the category. The fund had the lowest modified duration of its peer group, which contributed to its performance.

Dynamic Bond Fund

The category has the lowest assets under management at Rs 27,552 crore. Its assets increased by 52% with net inflows of around Rs 8,000 crore during fiscal year 21. The category actively manages duration because there is no regulatory constraint on the definition. The modified duration of the funds in the category has been between 1.59 and 5.37 years over the past three years.

IDFC Dynamic Bond Fund maintained the top spot despite a below-average performance for the category over the past nine months. It has been the top performer over the past three years with returns of 9.23% compared to the category average of 7.31%. The fund’s duration was the longest among its peers, averaging 5.37 years over the period.

The rise in yields during the quarter ended in March had an impact on its performance. But over the three-year period, given the fund’s long duration easing cycle, it outperformed its peers.

Medium duration funds

These funds have a term of three or four years depending on the regulatory definition and take active credit calls to generate returns. Exposure to sub-AAA securities has averaged 40.79% over the past three years, increasing from a high of 54.87% to 28.10% in March.

The IDFC Medium Duration Fund, with the same characteristics as the dynamic bond fund, maintained its leadership position.

The main driver, however, was the Axis Strategic Bond Fund, which dropped from third to second. It has posted returns of 5.92% over the past nine months against the category average of 4.74% and the highest return of 12.55%.

Over the past three years, it has recorded gains of 7.61% over the category average of 4.84% and the high of 9.12%. The fund actively managed its duration and fell to its lowest among its peers in the quarter ended in March as yields tightened.

Low duration funds

This money market oriented category attracted inflows of Rs 41,554 over the past year, alongside only the corporate and short duration categories. The category’s exposure to liquid securities averaged 63.20% over the year, of which 15.59% in sovereign and cash equivalents.

Two funds rose to number one. Canara Robeco Savings Fud ranked 1st on portfolio parameters including company concentration, asset quality, liquidity and exposure to sensitive sectors. The regime held 35% of sovereign portfolio over the quarter against 21.47% in the category.

The LIC MF savings fund has performed best among its peers at 1.22% over the past three months versus the category average of 0.72%.

It generated returns of 7% over the category average of 6.15% and a maximum fund return of 7.40% in the quarter ended March. The system ranked No. 1 in terms of business concentration and exposure to sensitive sectors. He was not exposed to sensitive areas.

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