NFO Note: Mirae Asset dynamic Bond Fund     (14-Mar-2017 )



Mirae Asset Dynamic Bond Fund is an open-ended income fund which aims to generate optimal returns through active management of a portfolio of debt and money market instruments.

Summary

Type An Open ended Income Scheme Benchmark Index CRISIL Composite Bond Fund Index
Min. investment: -Lump sum - Rs 5,000 and in multiples of Re 1 thereafter

- Systematic Investment Plan - Rs 1,000 and in multiples of Re 1 thereafter
Plans:



Options:
  • Regular
  • Direct
  • Growth*
  • Dividend
    • Dividend payout
    • Dividend Reinvestment
*default option
Face Value Rs 10 per unit Expense Ratio: Upto 2.25%
Entry Load NA Exit Load: 0.50% if redeemed within 6 months (180 days) from the date of allotment
Nil if redeemed after 6 months (182 days) from the date of allotment
Issue Opens March 03, 2017 Issue Closes March 17, 2017

Investment Objective*


The investment objective of the scheme is to generate optimal returns through active management of a portfolio of debt and money market instruments.

However, there is no assurance or guarantee that the objectives of the scheme will be realised and the Scheme does not assure or guarantee any returns.


*Source: Scheme Information Document


Is this fund for you?


Dynamic bond funds can be an alternative to route for debt fund investors in changing interest scenario. Mirae Asset dynamic Bond Fund (MADBF) is an open-ended income fund with an objective to generate optimal returns through active management of a portfolio of debt and money market instruments. It is a pure debt fund with flexibility to move across the debt and money market securities depending on the evolving interest rate scenario.

Therefore, the fund manager is expected to hold papers across maturities. The objective of actively managing the portfolio is to improve on returns vis-à-vis a less active portfolio. So, ideally, the fund would generate returns across the interest rate cycles; but depending on how the fund manager plays the cycle. If a wrong call is taken, the potential returns could get hindered.

These funds are considered to be ideal if you wish to play the interest rate cycle, but provided you have an investment horizon of medium term (at least 3 years) to long-term (5 years), and have slightly a high-risk appetite.


How will the fund allocate its assets?


Under normal circumstances, the asset allocation pattern followed by the fund will be as under:


Instruments Indicative allocations
(% of total assets)
Risk Profile
High/Medium/Low
Minimum Maximum
Money market instruments & Debt securities 0% 100% Low to Medium
(*Source: Scheme Information Document)

Further, the offer document states that:


  • The scheme does not intend to invest in securitized debt and overseas / foreign securities
  • The scheme may invest in repo/reverse repo in corporate bonds
  • The scheme shall not engage in short selling, credit default swaps and securities lending and borrowing
  • The scheme shall not invest in any unrated debt instruments and derivatives
  •  The scheme will not advance any loans
  • The scheme will not invest more than 10% of its NAV in debt instruments comprising money market instruments and non-money market instruments issued by a single issuer which are rated not below investment grade by a SEBI registered credit rating agency
  • The scheme shall not make any investment in any fund of funds scheme


What investment strategies will the fund follow?


In an endeavour to achieve the investment objective set out, MADBF will invest in debt and money market instruments and follow the below mentioned investment strategy…

The investment team will primarily use a top down approach for taking interest rate view, sector allocation along with a bottom up approach for security/instrument selection. The bottom up approach will assess the quality of security/instrument (including the financial health of the issuer) as well as the liquidity of the security.

The fund being a medium to long-term investment option it has the flexibility to respond to continuously changing market scenario by actively managing its portfolio in line with the evolving interest rate scenario. During periods when interest rates are expected to decline, the duration of the portfolio may be increased and during periods when interest rates are expected to harden, duration of the portfolio may be decreased. Similarly, the fund will change its allocation when spreads on corporate bonds are expected to contract, proportion of corporate bonds in portfolio may be increased and vice-versa. The interest rate risk/duration risk of the scheme may change substantially depending upon the outlook on interest rates and other factors like steepness of yield curve and bond spreads. Such outlook will be developed by assessment of various macro factors like economic growth, inflation, credit pick-up, liquidity and other such factors as considered relevant.  

Further the fund aims to minimize various risks such as interest rate risk, reinvestment risk, credit risk and liquidity risk etc. through diversification. The credit risk is minimized primarily guided by credit ratings assigned by external credit rating agencies. The credit quality of the portfolio will be continuously monitored using in-house research capabilities as well as inputs from external sources including independent credit rating agencies.



Fund Manager Profile


Mr. Mahendra Kumar Jajoo:  He is the Head – Fixed Income of Mirae Asset Global Investments (India) Private Limited. He is Chartered Account, Company Secretary and is a CFA charter holder. He holds a rich experience spanning over 25 years in the financial services industry. At Mirae Asset Mutual Fund, he is overall responsible for supervising debt schemes.

The other schemes managed by Mr Jajoo are: Mirae Asset Savings Fund and Mirae Asset Cash Management Fund and Mirae Asset Prudence Fund (Debt portion) and Mirae Asset Tax Saver Fund (Debt portion).



Fund Outlook


On evaluating the fund’s investment objective and the current policy rate scenario MADBF is certainly a risky bet. Ever since the sixth bi-monthly monetary policy was announced on February 08, 2017, debt yields have been rising. This is because, apart from keeping interest rates unchanged, RBI also change the stance of it monetary policy from ‘accommodative’ to ‘neutral’ citing risk to the inflation trajectory. So, it appears that the interest rate has come full circle. In addition, the rise in the global yield and rising commodity prices are adding pressure on RBI’s decision-making. The forthcoming fiscal stimulus by the US President Donald Trump is adding to the woes. The Federal Reserve is likely march forward to normalise interest rates backed by signs of economic vigour depicted by the US economy. 

On the aforesaid backdrop, portfolio construction will be a challenge, and so would generating appealing returns. However, being a dynamic bond fund MADBF has the flexibility to invest across the debt and the money market instruments with the changing rate cycle.

Hence, how the fund manager makes plays the interest rate cycle, remains the key to MADBF’s future performance.



DISCLOSURE AS PER SECURITIES AND EXCHANGE BOARD OF INDIA (RESEARCH ANALYSTS) REGULATIONS, 2014

About the Company including business activity

Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989.

QIS was promoted by Mr. Ajit Dayal with an objective of providing value-based information / views on news related to equity markets, the economy in general, sector analysis, budget review and various personal products and investments options available to the Public. It was the first company to start equity research on an institutional level.

PersonalFN' is a service brand of QIS and was started in the year 1999. In 1999, the Company registered the Domain name www.personalfn.com for providing information on mutual funds and personal financial planning, financial markets in general, etc and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services.

Quantum Information Services Private Limited (QIS) is registered as Investment Adviser under SEBI (Investment Adviser) Regulations, 2013 and having Registration No.: INA000000680. In terms of second proviso to Regulation 3 (1) of SEBI (Research Analysts) Regulations, 2014 the Company is not required to obtain Certificate of registration from SEBI.

Disciplinary history

There are no outstanding litigations against the Company, it subsidiaries and its Directors.

Terms and condition on which its offer research report
For the terms and condition for research report click here.

Details of associates

  1. Money Simplified Services Limited;
  2. PersonalFN Insurance Services India Limited ;
  3. Equitymaster Agora Research Private Limited;
  4. Common Sense Living Private Limited;
  5. Quantum Advisors Private Limited;
  6. Quantum Asset Management Company Private Limited;
  7. HelpYourNGO Private Limited;
  8. HelpYourNGO Foundation;
  9. QIEF Management LLC, Mauritius
  10. Natural Streets for Performing Arts Foundation;
  11. Primary Real Estate Advisors Private Limited;
  12. Rahul Goel;
  13. I V Subramaniam.

Disclosure with regard to ownership and material conflicts of interest

  1. Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company, except QIS receives fees for providing research to Quantum Equity Fund of Fund (QEFoF) which is Fund of Fund scheme managed by QMF and our associates has financial interest in the subject company.
  2. Neither QIS, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one per cent or more securities of the subject Company, at the end of the month immediately preceding the date of publication of the research report.
  3. Neither QIS, it's Associates, Research Analyst or his/her relative has any other material conflict of interest at the time of publication of the research report except that QIS is, as per SEBI (Mutual Funds) Regulations 1996, an associate / group Company of Quantum Asset Management Company Private Limited and Trustees and Sponsor of Quantum Mutual Fund (QMF) and to that extent there may be conflict of interest while recommending any schemes of QMF. However any such recommendation or reference made is based on the standard evaluation and selection process, which applies uniformly for all Mutual Fund Schemes. The payment of commission (upfront /annualized & trail), if any, for any Schemes by QMF to QIS is also at arm's length and as per prevailing market practices.

Disclosure with regard to receipt of Compensation

  1. Neither QIS nor it's Associates have any compensation from the subject Company in the past twelve months.
  2. Neither QIS nor it's Associates have managed or co-managed public offering of securities for the subject Company in the past twelve months.
  3. Neither QIS nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject Company in the past twelve months.
  4. Neither QIS nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.
  5. Neither QIS nor it's Associates have received any compensation or other benefits from the subject Company or third party in connection with the research report

General disclosure

  1. The Research Analyst has not served as an officer, director or employee of the subject Company.
  2. QIS or the Research Analyst has not been engaged in market making activity for the subject Company.

Subject Company means Mutual Fund Schemes

Quantum Information Services Pvt. Ltd. 101, Raheja Chambers, 213, Nariman Point, Mumbai - 400021. Tel: +91 22 6136 1200
Website : www.personalfn.com CIN: U65990MH1989PTC054667


© Quanutm Information Services Pvt. Ltd. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of PersonalFN is strictly prohibited and shall be deemed to be copyright infringement.

Disclaimer: Quantum Information Services Pvt. Limited (PersonalFN) is not providing any investment advice through this service and, does not constitute or is not intended to constitute an offer to buy or sell, or a solicitation to an offer to buy or sell financial products, units or securities. All content and information is provided on an 'As Is' basis by PersonalFN. Information herein is believed to be reliable but PersonalFN does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. PersonalFN and its subsidiaries / affiliates / sponsors or employees, personnel, directors will not be responsible for any direct / indirect loss or liability incurred by the user as a consequence of him or any other person on his behalf taking any investment decisions based on the contents and information provided herein. This is not a specific advisory service to meet the requirements of a specific client. Use of this information is at the user's own risk. The user must make his own investment decisions based on his specific investment objective and financial position and using such independent advisors as he believes necessary. All intellectual property rights emerging from this newsletter are and shall remain with PersonalFN. This is for your personal use and you shall not resell, copy, or redistribute this newsletter or any part of it, or use it for any commercial purpose. The performance data quoted represents past performance and does not guarantee future results. As a condition to accessing PersonalFN's content and website, you agree to our Terms and Conditions of Use, available here.

Quantum Information Services Pvt. Ltd. Regd. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021 Corp. Office: 101 Raheja Chambers, 213, Free Press Journal Marg, Nariman Point, Mumbai 400021. Email: info@personalfn.com CIN: U65990MH1989PTC054667

SEBI-registered Investment Adviser. Registration No. INA000000680, SEBI (Investment Advisers) Regulation, 2013

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Quanutm Information Services Pvt. Ltd. All rights reserved.
Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of PersonalFN is strictly prohibited and shall be deemed to be copyright infringement.

Disclaimer: Quantum Information Services Pvt. Limited (PersonalFN) is not providing any investment advice through this service and, does not constitute or is not intended to constitute an offer to buy or sell, or a solicitation to an offer to buy or sell financial products, units or securities. All content and information is provided on an 'As Is' basis by PersonalFN. Information herein is believed to be reliable but PersonalFN does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. PersonalFN and its subsidiaries / affiliates / sponsors or employees, personnel, directors will not be responsible for any direct / indirect loss or liability incurred by the user as a consequence of him or any other person on his behalf taking any investment decisions based on the contents and information provided herein. This is not a specific advisory service to meet the requirements of a specific client. Use of this information is at the user's own risk. The user must make his own investment decisions based on his specific investment objective and financial position and using such independent advisors as he believes necessary. All intellectual property rights emerging from this newsletter are and shall remain with PersonalFN. This is for your personal use and you shall not resell, copy, or redistribute this newsletter or any part of it, or use it for any commercial purpose. The performance data quoted represents past performance and does not guarantee future results. As a condition to accessing PersonalFN’s content and website, you agree to our Terms and Conditions of Use, available here.