Birla Sun Life Corporate Bond Fund

A debt oriented mutual fund scheme which will be investing a predominant portion of its assets in corporate debt.

Summary

Type	An Open ended Income Scheme.	Benchmark Index	CRISIL AA Short Term Bond Fund Index
Min. investment: Additional Purchase (Incl. Switch-in) Repurchase for all Plans/Options:	During New Fund Offer Period: Minimum of Rs 5,000/- and in multiples of Rs 1/- thereafter during the New Fund Offer period. During Ongoing Offer period: Fresh Purchase (Incl. Switch-in): Minimum of Rs 5,000/- and in multiples of Rs 1/- thereafter. Minimum of Rs 1,000/- and in multiples of Rs 1/- thereafter In Multiples of Rs 1/- or 0.001 units	Plans: Each Plan under the scheme offers a choice of three options which are as follow:	Direct; and Regular   Dividend Option (Payout & Reinvestment Facility) Growth Option Bonus option
Face Value	Rs 10 per unit	Expense Ratio:	Upto 2.50%*
Entry Load	Nil	Exit Load:	For exit within 365 days from the date of allotment – 3.00% of applicable NAV. For redemption / switch-out of units after 365 days but within 730 days from the date of allotment: 2.00% of applicable NAV. For redemption / switch-out of units after 730 days but within 1095 days from the date of allotment: 1.00% of applicable NAV. For redemption / switch-out of units after 1095 days from the date of allotment: Nil.
Issue Opens	March 30, 2015.	Issue Closes:	April 13, 2015.

*The Maximum total expense ratio for the Direct Plan as permissible under Regulation 52(6)(c)(i) will not exceed 2.00% p.a. of daily net assets of the Scheme.  

Investment Objective*

The investment objective of the Scheme is to generate returns by predominantly investing in a portfolio of corporate debt securities. The Scheme does not guarantee/indicate any returns. There can be no assurance that the Schemes' objectives will be achieved.

*Source: Scheme Information Document

 

Is this fund for you?

Birla Sun Life Corporate Bond Fund (BSCBF) endeavours to generate returns by predominantly investing in corporate debt securities with short to medium term maturities across the credit spectrum within the investment grade. The scheme will be managed so that the maximum duration of the portfolio is capped at 4 years.

The Scheme would seek opportunities across the credit curve and would endeavour to take benefit from mispriced credit opportunities. The fund will avoid active duration management. In fact, the fund manager within the maximum permissible mandate would endeavour to match the maturity of the underlying portfolio with proposed investment horizon, through taper-down approach.

The scheme shall not invest in government securities and State Developmental Loans but may invest in money market instruments including T-Bills, Repo and Reverse Repos & CBLO within the limits mentioned in asset allocation pattern. Rigorous in-depth credit evaluation and analysis aimed at ascertaining both the short term financial health and long term solvency of the debt issuers will be carried out before investing. In addition, criteria such as sound corporate managements, prospects of good future growth and strong past performance will be considered.

The scheme has no explicit constraints either to maintain or limit the portfolio turnover. Portfolio turnover will depend upon the circumstances prevalent at any time and would also depend on the extent of volatility in the market and inflows/outflows in the scheme. The Fund Manager will however endeavour to maintain a low portfolio turnover rate.

Under normal circumstances, the asset allocation of the Scheme will be as follows:

 

Instruments	Allocation Range (%)		Risk Profile High/Medium/Low
	Minimum	Maximum
Corporate Debt Securities* excluding Government Securities and State Developmental Loans	80%	100%	Low to Medium
Money market instruments	0%	20%	Low

*For the purpose of this Scheme, Corporate debt securities shall mean non-convertible debt securities, including debentures, bonds and such other securities of a company or a body corporate constituted by or under a Central or State Act, whether constituting a charge on the assets of the company or body corporate or not, but does not include debt securities issued by Government.

 

The launch of BSCBF has come at the time when the monetary policy stance has become accommodative. However, citing some immediate upside threats to inflation RBI has prefer to maintain status quo at the 1st bi-monthly monetary policy for the Financial Year (FY) 2015-16.

Having said this, there are several positives such as relatively stable outlook of Indian Rupee and optimism about the reformist agenda of the Government.

 

Fund Manager Profile

The fund will be managed by Mr. Maneesh Dangi. He is a MBA and CRM and has over 14 years of experience in Finance & Research. Prior to this, he worked with Pioneer Investcorp.

 

Fund Outlook

As stated by RBI, “going forward, the accommodative stance of monetary policy will be maintained, but monetary policy actions will be conditioned by incoming data. First, the Reserve Bank will await the transmission by banks of its front-loaded rate reductions in January and February into their lending rates. Second, developments in sectoral prices, especially those of food, will be monitored, as will the effects of recent weather disturbances and the likely strength of the monsoon, as the Reserve Bank stays vigilant to any threats to the disinflation that is underway. The Reserve Bank will look through both seasonal as well as base effects. Third, the Reserve Bank will look to a continuation and even acceleration of policy efforts to unclog the supply response so as to make available key inputs such as power and land. Further progress on repurposing of public spending from poorly targeted subsidies towards public investment and on reducing the pipeline of stalled investment will also be helpful in containing supply constraints and creating room for monetary accommodation. Finally, the Reserve Bank will watch for signs of normalisation of the US monetary policy, though it anticipates India is better buffered against likely volatility than in the past.”

On this background, it looks unlikely that, long term bonds would continue to rally in the same manner they have rallied in FY 2014-15. Furthermore, it is expected that, the yield curve which is slightly inverted at the movement may somewhat normalise going forward. It is a condition wherein long term maturity papers have yields lower than those on papers with shorter maturities. Under such circumstances, a fund investing in shorter to medium term papers may benefit. Yet considering that BSCBF has no prior track record it remains unclear how far it goes in capitalising on opportunities.

 

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