True To Mandate

Evolutionary biologist Richard Dawkins would call it a ‘meme’, but there is an increasing trend among fund managers to read books that deal with tangential topics like physics, history, anthropology and even psychology. Apart from giving them an alternative perspective, tangential reading also helps them evolve as money managers.

Take the case of Maneesh Dangi, fund manager at Birla Sun Life Mutual Fund, who loves reading books on psychology. “It helps me to understand myself better,” he says.

“There’s so much volatility in every man’s life… you have to understand what stress can do to your mood and your behaviour. Besides all this, psychology is the only subject that’s closest to science and spirituality,” reasons Dangi, who rates Dawkins’s The Selfish Gene as one of his all-time favourite books.

Wider reading has certainly helped Dangi, who manages some of the largest debt fund pools in the country. Dangi’s Medium-Term Fund, which yielded 11.16 per cent over a three-year period, has topped the short-term bond category. The fund, as of January-end, manages assets worth Rs 3,683 crore.

“My mandate is to outperform passive products like bank fixed deposits and ultra short-term funds over a one-to-three-year horizon. You derive better outcomes if you stay invested in this fund for two to three years,” says Dangi.

Short-term bond funds invest in fixed-income securities with short-to-medium-term duration. Given their focus on instruments with a short duration, they offer lower interest-rate sensitivity as compared to funds with longer durations. Over 74 per cent of the fund is invested in corporate debentures. In terms of credit quality, the fund has over 75 per cent of its assets in papers bearing ‘AA’, ‘A’  and ‘below-A’ ratings. This tells you that the fund manager has gone down the ratings curve to generate more portfolio returns.

“We do a thorough research on companies before lending them money. Our research team, at any point in time, has over 170 companies under constant watch. Newer companies are added to this

universe only after screening their financials for a few months,” assures Dangi.

Birla Sun Life Mid-Term Fund, on average, holds 40-60 securities at any given point in time. The portfolio is structured in a way to yield 250-300 basis points (100 basis points make 1 per cent) above government bonds.

“Extra carry from lower-rated papers has helped us generate higher portfolio returns. Sometimes, we also initiate duration play (within 1-3 years) to eke out small gains,” explains Dangi.

“This fund is meant for retail investors and it can be a part of their core long-term portfolio. Our idea is to manage money more actively and deliver better portfolio returns,” says Dangi, looking to tempt the selfish gene in potential investors.— Shailesh Menon

(This story was published in BW | Businessworld Issue Dated 20-04-2015)