 "Fund pick: HDFC Short Term Plan")
HDFC Short Term Plan has been ranked in the top 30th percentile (CRISIL Fund rank 1 or 2) for the past five consecutive quarters. The scheme invests in debt and money-market instruments of short to medium-term maturity across the credit spectrum. The scheme is managed by Anil Bamboli. Its quarterly average assets under management stood at Rs 2,391 crore at the end of March 2016 quarter.
Superior performance
The fund has consistently outperformed its benchmark (CRISIL Short-Term Bond Fund Index) and the category (represented by the Corporate Opportunities Funds under CRISIL Mutual Fund Ranking - March 2016) across all time frames, except during the 5-year period when it underperformed the category marginally (see chart).
The fund delivered a compound annual return of 8.01 per cent, Rs 1,000 invested on April 1, 2002, would have grown to around Rs 2,982 on June 3, 2016. A similar investment in the category and benchmark would have grown to around Rs 2,824 (7.59 per cent) and Rs 2,678 (7.19 per cent), respectively.
A monthly systematic-investment plan (SIP) of Rs 1,000 over ten years (i.e., an investment of Rs 1,20,000) would have grown to around Rs 1,91,633, delivering an annualised return of 9.08 per cent. A similar investment in the benchmark would have grown to around Rs 1,84,092 or 8.41 per cent (see table).
The fund has maintained lower duration over the past three years to April 2016 compared with the category. When yields started rising sharply after June 2013, the fund decreased its duration. It increased the duration again to some extent, when interest rates started falling from the last quarter of 2014. As of April 2016, the fund's duration was 1.43 years, compared with 2.07 years for the category.
Portfolio analysis
The fund's mandate allows it to invest across credit spectrum. The fund has utilised this scope to a good extent by investing 56.14 per cent of the portfolio in sub-AAA rated securities (including unrated securities) on an average, while maintaining 36.37 per cent in AAA-and-equivalent rated securities over the past three years to April 2016.
Although the fund has taken significant credit exposure, it has never invested in sub-investment grade securities (securities with ratings below BBB) over the past three years. However, 5.20 per cent of its assets were invested in unrated securities on an average. The fund has reduced its exposure in AAA-and-equivalent rated securities drastically from 70.82 per cent in May 2013 to 15.36 per cent in April 2016.
Banks, finance, construction and consumer durables have been the focus sectors of the fund, with 35.63 per cent invested in the finance sector alone on an average over the past three years.
