Page 35 - mutual-fund-insight - Mar 2021_Neat

information you need on the fund
pages of Value Research Online.
Look at the break-up of the
portfolio by credit rating as well
as the data on the maturity
profile of the portfolio and
compare it with other funds in
the category (the screenshot titled
‘Credit Rating vis-à-vis Category).
Typically, these will point you to
where the risk is coming from.
And if that makes you too
nervous, look for alternatives or
else stay put even as you keep
monitoring. On www.valueresearchonline.com, you can compare a debt fund’s credit break-up
But if the risk grade of your with that of the category.
fund climbs two positions vis-à-vis
the reference grade, that’s when
your fund is assuming far more assumption to make. *65*3<:065
risk than is perhaps warranted. For The idea is to identify and steer While returns are there to
a lot of investors, that should be clear of the outliers. These are evaluate funds, investors didn’t
signal enough to look for safer often the ones that lure investors have any objective measure to
options. Just go back to the graph with their outsized returns. But look at risks. But this rejigged
titled ‘Analysis of ultra-short- unfortunately, they also run the risk-o-meter has filled this gap.
duration category’ and look at the most risk of turning toxic, thereby While the new mandate ends up
two funds which are two notches inflicting maximum damage. But being suboptimal in case of
higher (yellow bubbles) than the by anchoring yourself to the equity funds and needs to
reference-risk grade (light blue reference-risk grade, you can easily undergo some alteration, on the
bubbles). Did you notice their spot them and avoid them. fixed-income side, it is a great
substantially higher exposure to So, in any fund listing on Value enabler to compare the
lower-credit-quality papers? Research Online, make sure to go underlying risk of different funds
Now this reference-risk-grade to the Risk Stats tab and look at and weed out the ones that go
approach assumes that most funds the ‘Riskometer’ column before overboard. So, while you look at
in a category are fairly disciplined choosing a fund (see the returns, make sure to check the
and don’t go overboard on risk, screenshot titled ‘Assessing risk’). risk-o-meter to not get caught
making the modal risk grade a It will facilitate an easy unawares when risk knocks at
suitable benchmark for the comparison of funds as you’ll be the door.
acceptable level of risk. And we able to sort and differentiate them Having said that, we believe it
believe that’s a reasonable within categories. will realise its full potential when
it becomes a deterrent for AMCs
from assuming higher risk than is
(ZZLZZPUN YPZR warranted. And for that to happen,
you, the investor, will have to
contribute. Make sure that these
disclosures don’t go unnoticed. If
you see your fund climbing up on
the risk-o-meter, ask questions
from your AMC instead of turning
The fund listing on www.valueresearchonline.com tells you the risk-o-meter a blind eye to it. And if that
grade for all the funds in the category. persists, you may need to vote
with your feet.

Mutual Fund Insight March 2021 33
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