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Management of funds is a never-ending journey, where a non-homogenous set of people with varied views will be investors at different points in time. Good investor experience is key to repeat, greater and longer investments.
Simplicity is preferred over complexity and timing the market is a futile exercise. The key is to identify the right person and the right fund, and if this fund largely meets expectations across time and interest rate cycles, investors will prefer to enjoy the fruits of indexation instead of second-guessing and endeavouring to time the market.
These basic tenets combined with our three-pillar approach of Safety, Quality, Liquidity (SQL) form the genesis of fixed income fund management at ITI Mutual Fund.
Deglobalization – reset in a new world order
Events over the past 2-3 years, first led by Covid-19 in 2020, then followed by Russia’s invasion of Ukraine this year are causing tectonic shifts on the geopolitical chessboard. Further, the sharp pace of reset and divergence between the top 2 economies of the world is likely to further aggravate the global landscape with the potential impact quite unknown.
Amidst such conditions, markets are expected to be volatile and interest rate cycles are expected to be shorter, swifter and possibly more brutal than in the past. Thus, volatility is expected to remain a key feature of the coming era.
Volatility commands respect but volatility can also be a friend and bring opportunity. Thus, in this new era, there is an urgent need for active fund management. Well-managed active and dynamic fund strategies should be able to comfortably outperform passive fund strategies.
ITI Dynamic Bond Fund
ITI Dynamic Bond Fund (ITIDBF) best captures our thought process and principles of active fund management.
The fund endeavours to actively manage duration as per the fund manager’s outlook on rate cycles and thereby aspires to meet duration risk expectations of investors across time. As a fund house, ITI Mutual Fund is credit averse, and thus credit exposure if any is largely confined to top rated government owned entities or blue-chip corporations from the private sector.
For the sake of simplicity, we see ITIDBF as a NIFTY or a large cap fund in equity parlance – which in normal times has potential to probably capture about 2/3 returns of a small cap fund but in difficult times has potential to protect more than 2/3 downside of a small cap fund. If investors were to assess their journey in ITIDBF over a couple of high and low cycles, ITIDBF expects to remain competitive in the market - the difference being that in this journey, we always strive to give our investors a good night’s sleep as we are credit averse and operate with robust controls.
Below is an illustration of active duration management in our flagship duration funds viz. ITI Dynamic Bond Fund and ITI Banking & PSU Debt Fund. The yield movement of a 3-year AAA-rated public sector unit bond against these funds’ modified duration is shown for comparison.
Active duration management (Dec 2020 – Aug 2022)
Investors are encouraged to look at ITI Dynamic Bond Fund as a core debt allocation. ITI Dynamic Bond Fund aspires to be an all weather fund – MIGHTY ACROSS SEASONS.
ITI Banking & PSU Debt Fund
Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.
