 "FUND PICK: Invesco India Credit Opportunities Fund")
Invesco India Credit Opportunities Fund, classified under ultra-short-term debt fund category of CRISIL Mutual Fund Ranking (CMFR), has been a consistent top performer. It has featured in the top 10 percentile (CRISIL Fund Rank 1) in 11 of the last 12 quarters ended March 2016.
The fund's objective is to generate high level of current income (vis-a-vis treasury bills) consistent with preservation of capital and maintenance of liquidity by investing primarily in investment grade debt securities and money market instruments. The fund was incorporated in August 2009. It had quarterly average assets under management of Rs 2,315 crore at the end of June 2016, and is managed by Nitish Sikand.
Ultra short-term debt funds typically invest in short-term securities of up to one year, short-term corporate debt papers, certificates of deposit (CDs), commercial papers (CPs), treasury bills and other money market instruments. Compared with income and short-term income funds, these funds’ portfolios are more liquid and less interest rate sensitive.
Consistent performance
The fund outperformed its benchmark (CRISIL Liquid Fund Index) across all periods analysed. Compared with peers (schemes defined under the ultra-short-term debt category of CMFR March 2016), it outperformed across periods analysed except in the last one year (see chart).
An investment of Rs 1,000 in the fund at its inception would have grown to Rs 1,771 (8.65 per cent CAGR) on July 18, 2016 compared with Rs 1,674 (7.76 per cent CAGR) for investment in the benchmark and Rs 1,734 (8.32 per cent CAGR) for investment in the category (CAGR is compounded annual growth rate). The fund has also outperformed in systematic investment plan (SIP) returns vis-a-vis its benchmark across all time frames.
Portfolio analysis
Over the past one year, the fund has had average exposure of around 91 per cent to CPs versus its peers’ 27 per cent. The fund maintained considerably lower exposure (2.16 per cent) to CDs compared with the category (30 per cent) over the same period.
In terms of the credit profile, the fund has maintained a major portion of its assets in short-term highest rated securities (A1+). In the past one year ended May 2016, 92.5 per cent of its portfolio, on average, was invested in top rated short-term securities compared with the category’s 55 per cent. Its exposure to long-term top rated paper (AAA) was marginal in the last one year at 0.4 per cent compared with the category’s 18.19 per cent.
The fund’s average maturity varied from 23 days to 40 days in the past one year compared with its peers’ average maturity ranging from 207 days to 329 days. Low average maturity reduces the fund's interest rate risk.
