Thread by @prospurts

An exceptional interview by Head of Fixed Income at @IDFCMF, 𝗠𝗿. 𝗦𝘂𝘆𝗮𝘀𝗵 𝗖𝗵𝗼𝘂𝗱𝗵𝗮𝗿𝘆. A crisp explanation and outlook of the #FixedIncome securities. @FundsIndia @arun_kumar_r

Following points were emphasized by the fund manager (1/7)

He advises 3 bucket framework for the asset allocation of the debt portfolio.
1. Liquidity Bucket (10%)-for cash management purpose (Liquid & Overnight Fund)
2. Core Bucket (60-70%)-control credit and duration risk (full of AAA with average maturity below 5 years) (2/7)

3. Satellite Bucket (20-30%)-alpha product - active duration products like government bond funds, dynamic bond funds and credit risk funds (Aggressive Investors only).(3/7)

The biggest mistake one makes is to use satellite products in one’s core portfolio. He also points out that the investor needs to be sure about the risk taken and then leave the return as a function of the market and the environment. (4/7)

YTM should not only be used as a measure of return but also as a measure of risk. Don't chase higher YTM’s without understanding the underlying risk. (5/7)

Cyclically don’t accept that one will get compensated adequately for buying conservative fixed income however the cycle is so intense it does not make sense to dilute the credit quality in order to chase higher returns. (6/7)

𝗜𝘁𝘀 𝘁𝗵𝗲 𝘀𝗲𝗮𝘀𝗼𝗻 𝗼𝗳 𝘀𝘂𝗿𝘃𝗶𝘃𝗶𝗻𝗴 𝗮𝗻𝗱 𝗻𝗼𝘁 𝘁𝗵𝗿𝗶𝘃𝗶𝗻𝗴. 𝗧𝗶𝗺𝗲 𝘁𝗼 𝘀𝗲𝘁𝘁𝗹𝗲 𝗳𝗼𝗿 𝘄𝗵𝗮𝘁 𝗶𝘀 𝗼𝗻 𝘁𝗵𝗲 𝘁𝗮𝗯𝗹𝗲. (7/7)