Axis Banking Debt Fund (ABDF)

An open-ended debt scheme with an aim to explore investment opportunities in the debt and money market instruments issued by banks.

Summary

Type	Open-ended Debt scheme	Benchmark Index	CRISIL Short Term Bond Fund Index
Min. Investment: Additional Investment:	Rs 5,000 and in multiples of Re 1 thereafter Rs 1000 and in the multiples of Re 1	Face Value	Rs 1,000
Entry Load	Nil	Exit Load *	Nil
Issue Opens	May 30, 2012	Issue Closes	June 07, 2012

Investment Objective*

The primary investment objective of the scheme is to generate stable returns by investing predominantly in debt & money market instruments issued by banks.

*Source: Scheme Information Document

Is this fund for you?

Short-term income funds are debt funds, investing in fixed income instruments having shorter maturity of 1 year to 3 years. These funds emphasise on providing a steady and regular flow of income while lower interest rate volatility over a period of time. Short term income funds are sensitive to interest rates and tend to witness fluctuation typically in the rising interest rate scenario; however the impact of the fluctuation fades out over a period of time. Since they are ideal for parking short term funds preferably in the falling interest rate scenario, they may turn out to be hazardous in the rising interest rate scenario.

Axis Banking Debt Fund (ABDF) is one such short-term income fund from the stable of Axis Mutual Fund. Axis Mutual Fund started its operations in 2009 and is yet to prove its mettle in terms of a consistent performer.

The timing of the launch of the fund seems quite appropriate as interest rates have started to ease down gradually. ABDF is positioned to take advantage of the short-term interest rate movements by investing mainly in debt and money market instruments issued by banks.

Some of the instruments in which ABDF will invest are:

• Certificate of Deposit (CD) of scheduled commercial banks and public financial institutions
• Commercial Paper (CP) issued by Public Financial Institutions
• Treasury Bill (T-Bill)
• Repo (Repurchase Agreement)
• Securities created and issued by the Central and State Governments
• Floating rate debt instruments
• Non-convertible debentures and bonds
• Collateralised Borrowing and Lending Obligation (CBLO)
   

Moreover, the scheme shall not refrain from investing in derivatives and securitized debt.

Portfolio & Investment Strategy

With a mandate to generate stable returns by investing predominantly in debt & money market instruments issued by banks, ABDF intends to maintain high credit quality and liquidity by investing atleast 70% the net assets of the scheme in securities rated AAA/A1+ and equivalent. As a matter of maintaining high credit quality the fund shall not invest in securities rated below AA- or equivalent.

Moreover the investment team of the AMC will carry out rigorous in depth credit evaluation of the money market & debt instruments proposed to be invested in. The credit evaluation will essentially be a bottom up approach and include a study of:
 

• The operating environment of the issuer;
• Past track record as well as the future prospects of the issuer; and
• Short-term / long-term financial health of the issuer.
   

Asset Allocation Pattern

Asset Class	Allocation Range	Risk Profile High / Medium / Low
Debt & Money Market Instruments issued by banks	80%-100%	Low to Medium
CBLO, Repo, T-Bills and Government Securities. *	0%-20%	Low

*Includes Financial Institutions and units of debt and liquid mutual fund schemes. Investment in mutual fund units will be restricted to 10% of the net assets of the scheme. No investment will be made in instruments issued by NBFCs. The Scheme will not undertake repo transactions in corporate debt securities.
Source: Scheme Information Document

Fund Manager Profile

The fund will be managed by the duo, Mr Ninad Deshpande and Mr R. Sivakumar. Mr Ninad Deshpande is the Fund Manager - Fixed Income at Axis Mutual Fund. He is a Bachelor of Engineer and also has to his credit a MMS in Finance. Mr Deshpande brings with him 10 years of experience in treasury management and fixed income markets. His previous assignments include Lead Portfolio Manager - Fixed Income, Goldman Sachs Asset Management India Pvt. Ltd. (April 2008 till May 2009), AVP - Fixed Income at Franklin Templeton Asset Management India Pvt. Ltd. (April 2004 till April 2008), Deputy Manager-Treasury, Bank of Bahrain & Kuwait (March 2003 to April 2004), Deputy Manager- Treasury, SBI DFHI Ltd. erstwhile SBI Gilts Ltd (June 2001 to March 2003).

Mr Deshpande currently also manages Axis Liquid Fund, Axis Treasury Advantage Fund, Axis Short Term Fund, Axis Dynamic Bond Fund, Axis Income Fund and Axis Fixed Term Plan Series (along with Mr. R. Sivakumar).

Mr R. Sivakumar is the Head - Fixed Income & Products at Axis Mutual Fund. He is an Engineer from IIT Chennai and along with a PGDM from IIM Ahmedabad. Mr Sivakumar brings along with him 12 years of experience in the Indian asset management industry across asset classes. Prior to joining Axis Mutual Fund, Mr Sivakumar was associated with Chief Operating Officer (April 2004 - July 2009) at Fortis Investment Management (India) Pvt. Ltd. - (now known as BNP Paribas Mutual Fund). Fund Manager - Fixed Income with Sundaram Asset Management Company Limited (January 2001 - March 2004), Research Analyst with Zurich Asset Management (India) Private Limited (December 1999 - December 2000).

Mr Sivakumar currently also manages Axis Liquid Fund, Axis Treasury Advantage Fund, Axis Short Term Fund, Axis Fixed Term Plan Series, Axis Dynamic Bond Fund and Axis Income Fund (along with Mr. Ninad Deshpande), Axis Constant Maturity Fund, Axis Income Saver (along with Mr. Pankaj Murarka and Mr. Sudhanshu Asthana) and Axis Triple Advantage Fund (along with Mr. Chandresh Nigam and Mr. Sudhanshu Asthana), Axis Hybrid Fund - Series 1 - 3 (along with Mr. Jinesh Gopani) and Axis Capital Protection Oriented Fund - Series 1 to 4 (along with Mr. Sudhanshu Asthana).

Fund Outlook

Since the fund is in a position to take advantage arising from short term interest rate movement, due to its mandate of investing in debt and money market instruments of banks; ABDF may well achieve its objective of generating stable returns for its investors. However, with its penchant to remain majorly invested in debt instruments of banks, the challenge for the fund manager will be to take timely entry and exit from the debt and money market instruments of banks depending on the interest rate scenario as well as maintaining enough liquidity in the fund in order to manage redemption requests.

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