IDFC Super Saver Income - Medium Term Review

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IDFC Super Saver Income - Medium Term

IDFC Super Saver Income-Medium Term (SSI-MT) is a long-term income fund. Its current asset size of Rs 2240.34 crore assets under management (AUM) is higher than the category median of Rs 1457 crore. The fund was launched in June 2003 and is benchmarked against the Crisil Short Bond Index.

Peer Group. We have used a set of income funds (excluding dynamic bond funds and credit opportunity funds) with an average modified duration of more than 24 months in the last three years. There were 26 funds that fulfilled our criteria.

Objective. The scheme seeks to generate stable returns with a low-risk strategy by creating a portfolio that is invested in good quality fixed income & Money Market securities.

Returns.

	Scheme Name		6 Months		1 Year		3 Years		5 Years		YTD		Since Inception
IDFC SSIF-MT-Reg(G)		4.73		9.74		8.62		9.41		1.36		7.39
Crisil Short Term Bond Fund Index		4.12		8.77		7.39		7.58		1.12		6.47
Category Average		5.58		10.39		8.33		8.08		1.90

All figures in % as on February 28, 2013; Returns above 1-year in CAGR terms

The fund has outperformed its benchmark but underperformed its category average over the six-month, one-year and three-year horizons. Its return since inception is also higher than that of its benchmark. Over the five-year horizon, the fund has beaten its benchmark and its category average.

			2008		2009		2010		2011		2012
IDFC SSIF-MT-Reg(G)		15.20		5.98		6.66		9.16		9.95
Average		16.37		0.84		4.67		8.25		10.41
Crisil Short Term Bond Fund Index		9.39		6.62		4.61		7.85		9.10

All figures in %

In terms of calendar year returns the fund has done better than the category average in 2009, 2010 and 2011. It underperformed compared to the category average in 2008 and 2012, when there was marginal underperformance. In comparison to its benchmark it outperformed in 2008, 2010, 2011 and 2012 while it underperformed only 2008 and 2010.

Interest-Rate Risk. The current modified duration of the fund is 33.84 months or 2.82 years. The category median is 60 months or 5 years. Thus, the fund is less aggressive on duration compared to its category.

Credit Risk. The fund has a portfolio that has a relatively less credit risk compared to the category average. (Refer to the appendix below to see the top holdings of the fund)

	Ratings		IDFC SSI - MT		Category Average
AAA		45.16		20.68
SOV		23.63		53.13
AA+		22.50		9.29
Cash & Equivalent		4.11		10.94
A1+		3.65		10.60
AA		0.95		4.82
AAA(SO)				1.16

As on Jan 31, 2013

YTM. The fund's yield to maturity (YTM) currently stands at 8.82 per cent. The category median is 8.33 per cent. The average YTM for the fund over the last 12 months has been 9.34 per cent and over the last 24 months this has been at 9.43 per cent.

Portfolio. Over the past one year 2012, the fund maintained a portfolio that was heavily dominated by corporate debt. The fund has also maintained a lower allocation to government securities than the category average.

Portfolio: Average holding over last 12 months as on January 31, 2013

	Asset Type		IDFC SSI MT		Category
Cash & Cash Equivalents		3.22		11.46
Certificate of Deposit		9.92		21.44
Commercial Paper		3.79		6.81
Corporate Debt		63.49		45.66
Deposits				0.62
Floating Rate Instruments				6.94
Government Securities		17.56		34.45
PSU & PFI Bonds		11.68		6.39
PTC & Securitized Debt				1.74
Treasury Bills				2.59

Change in the portfolio: Over the last one year the fund's portfolio has reduced its corporate debt allocation. Allocation to government securities was 11.55 per cent in February 2012 and then this was reduced to nil by June 2012 and it was re-introduced to the portfolio by August at 23.80 per cent. The fund manager may have done so since interest rates are expected to soften in 2013, and for this the exposure to certificate of deposit was reduced.

	Asset Type		Feb-2012		Jan-2013		Change in Asset Type
Government Securities		11.55		23.63		12.08
Corporate Debt		60.94		68.61		7.67
Commercial Paper				3.61		3.61
Cash & Cash Equivalents		3.85		4.11		0.26
PSU & PFI Bonds		6.45				-6.45
Certificate of Deposit		17.21		0.04		-17.17

Expense Ratio. The fund has an expense ratio of 1.38 per cent which is higher than the category median of 1.25 per cent. A high expense ratio is a negative for investors in a debt fund where returns are already much lower compared to equity funds.

Exit Load. The fund has an exit load of 0.60 per cent on or before nine months. This is less restrictive when compared to most of the other funds in this category which have an exit load applicable up to one year.

Fund Manager. Anupam Joshi is the Fund Manager for IDFC SSI Medium Term Plan since March 19, 2009. He also manages IDFC Money Manager Fund - Treasury Plan, IDFC Money Manager Fund - Investment Plan, IDFC Cash Fund and IDFC Ultra Short Term Fund. He has over 10 years of experience in Portfolio Management & Dealing. Prior to this, Anupam Joshi was working with Principal PNB Asset Management Company.

Conclusion. The fund has outperformed its benchmark in four of the last five calendar years and also it has a low exit load, making it easier for redeployment. Its performance could have been even better if the expense ratio was more in line with the category median, but considering that the fund has a better risk-return profile there is still a strong case for investors with 2-3 year horizon to invest with the fund.

Appendix

	Instrument name		Type		Returns
08.15% GOI - 11-Jun-2022		SOV		16.76
08.19% GOI - 16-Jan-2020		SOV		6.87
Sterlite Industries (India) Ltd. 9.24% (20-Dec-22)		AA+		4.68
Sesa Goa Ltd. -365D (22-Nov-13)		A1+		3.61
Net Current Asset		Cash & Equivalent		3.60
LIC Housing Finance Company Ltd. 9.9% (8-Apr-15)		AAA		3.34
Power Finance Corporation Ltd. 9.63% (15-Dec-14)		AAA		2.95
Sterlite Industries (India) Ltd. 9.4% (27-Nov-22)		AA+		2.94
Sterlite Industries (India) Ltd. 9.4% (25-Oct-22)		AA+		2.94
Power Finance Corporation Ltd. 8.85% (15-Oct-14)		AAA		2.91

 

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