Currently, debt funds offer at par returns with bank FDs. In such a scenario, why do you think that investors should invest in fixed income funds?
Since we run a portfolio which is invested mainly in highest rated papers, our portfolio has performed reasonably well when compared to the bank fixed deposits (FDs). Investing in debt funds becomes meaningful once the investor has invested for more than 3 years and above and the indexation benefit kicks in whereas bank FDs do not have indexation benefit. Mutual fund schemes provide easy liquidity facility and investor can redeem at any time at applicable NAV whereas in case of FD, normally there is a penalty on premature withdrawal.
Share with us your outlook on d​ebt market
Domestically, we can see recovery in growth numbers and inflation inching upwards. Green shoots are visible in growth numbers. Improvement in GST collections is a positive signal. Inflation, which was initially limited to food items is now visible in auto sector, commodity prices and telecom space. Leeway to cut rates is limited for RBI as risks of policy fatigue is rising. Globally, US and Europe face challenges in the near term. An increase in Covid-19 cases may result in outright economic contraction. Vaccine news is a positive game changer.
Banking and PSU Fund of LIC MF has crossed Rs.2, 000 crore AUM, what are the three things that have contributed to this growth?
Three things that have contributed to the growth of LIC MF Banking and PSU debt fund. Number one is our strong investment philosophy and a robust research team, number two-continuous communication with distributors, corporates and banks and number-three is good service from our sales and investor services team.
How is this fund different from other Banking and PSU funds?
We have a substantial exposure to highest rated PSU papers; however, we are not in a position to comment about other banking & PSU funds in the Industry
The fund has performance at par with its competition. What strategies have you put in place to improve its performance?
We have been investing in sovereign papers along with PSU papers in this fund. In March 2020, when there was a huge liquidity shortage due to Covid-19, this fund remained unaffected as this fund had enough liquidity. With interest rates bottoming out, going ahead we have adopted a barbell strategy to protect the interest of the investors.
How do you plan to mitigate risks in LIC Banking & PSU Fund?
Our investment philosophy focuses towards safety / capital preservation while optimizing returns. Further all investments are subject to the SLR Process where: S stands for Safety of investment, L stands for liquidity of the portfolio and R stands for the returns of the portfolio. For any debt instrument, the AMC/fund manager first looks at the safety of the investments and then at the liquidity of the instrument and finally the risk adjusted returns of the portfolio.
Why do you think distributors should recommend this scheme to their clients?
What would a distributer expect from a fund house? Robust investment processes, regular communication from fund management and endeavour to generate risk adjusted return, decent after sales service; all these things together makes an interesting proposition for the distributor to consider LIC MF Banking & PSU Debt fund for their clients.
