Page 33 - mutual-fund-insight - Mar 2021_Neat

Most funds in this category
+`UHTPJ IVUK M\UKZ HZ WSHJLK VU [OL currently have a Macaulay
YPZR V TL[LY duration of over four years. Now,
according to the methodology,
As per the new risk-o-meter, Moderately while the same risk score is
most dynamic bond funds Moderate High assigned for a portfolio duration
bunch up under the Low to of over four years, the risk-o-
‘Moderate’ risk grade. Moderate High meter clearly captures the credit

exposures (graph titled ‘Analysis
of the dynamic-bond category’).
Low Very High You may wonder why the fund
marked as ‘High’ (red bubble) is
RISKOMETER tagged so even though it has
Figures represent the number of funds; Excludes FoFs and funds suspended for sale much lower aggregate exposure to
AA & below papers than the
yellow bubbles. Well, that’s
because it goes deeper down the
(UHS`ZPZ VM [OL K`UHTPJ IVUK JH[LNVY` credit curve. So, while its

While the same risk score is assigned for the duration of over four years, percentage exposure may be lower,
the risk-o-meter clearly captures the credit exposures. all of it is in securities rated A and
z Moderate z Moderately High z High below, which are much riskier. So
Exposure to AA and below rated papers (%) 25 category – the credit-risk funds
35
here again, the risk-o-meter passes
our quality test.
30
Let’s take a look at one more
(see the chart ‘Credit-risk funds as
20
placed on the risk-o-meter’). A
15
category which is perceived to be
riskiest also has shades of grey.
10
5
fact that not all credit-risk funds
are alike.
0
0 1 2 3 4 5 6 7 8 9 The risk-o-meter brings out the
We placed the one-year returns
Macaulay duration (years) and the lower-rated exposure of
Portfolio data as on December 31, 2020
Excludes FoFs, funds suspended for sale and funds whose Macaulay duration is not available this category on the same graph
(see ‘Analysis of the credit-risk
across four risk grades. bunch up under the ‘Low to category’) and again noticed that
A further analysis reveals some Moderate’ tag, it has been effective the funds that generated higher
important implications for in calling out the outliers. returns ranked higher on the risk-
investors. Look at the graph titled Now let’s look at the risk-o- o-meter as well. Most of the funds
‘Analysis of the ultra-short- meters in the dynamic bond fund tagged ‘Very High’ are the ones that
duration category’, where we have category. This versatile category either have high exposure to
mapped the funds’ risk grades spans across three risk-o-meter securities rated A and below or
alongside their returns and tags (look at the graph ‘Dynamic those that are unrated. Of course,
exposures to lower-rated papers. bond funds as placed on the risk- the liquidity score also has a role
The data speaks for itself. Funds o-meter’) but most bunch up to play here.
that have delivered higher returns under ‘Moderate’. While the general trend shows
are also riskier on credit quality,
and the risk-o-meter has been able 6U [OL KLI[ ZPKL [OL YPZR V TL[LY WHZZLZ ^P[O MS`PUN
to pick those risk signals loud and
clear. Even though most funds JVSV\YZ (UK [OPZ PZ ^OLYL P[ OVSKZ H SV[ TVYL YLSL]HUJL [VV

Mutual Fund Insight March 2021 31
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