Fund Pick: Why Aditya Birla Sun Life Corporate Bond Fund is a winner

Higher returns, high quality investments

Launched in March 1997, Aditya Birla Sun Life Corporate Bond Fund has featured in the top-30 percentile of the corporate bond funds category of CRISIL Mutual Fund Ranking (CMFR) for the past four quarters ended March 2021. The month-end assets under management of the fund rose to Rs 24,669 crore in May 2021 from Rs 15,654 crore in June 2018.

Kaustubh Gupta has been managing the fund since April 2017. The investment objective of the scheme is to generate optimal returns with high liquidity through active management of the portfolio by investing in high quality debt and money market Instruments.

Performance

The fund has consistently outperformed its peers (funds ranked under the corporate bond funds category in CMFR in March 2021) over the trailing periods under analysis.

A sum of Rs 10,000 invested in the fund on March 03, 1997 (inception of the fund), would have grown to Rs 87,236 (9.3 per cent CAGR) on July 1, 2021, compared with Rs 73,898 (8.56 per cent CAGR) for its peer group over the same period.

Duration management

Over the past three years, the fund’s modified duration ranged from 1.13 years to 3.29 years – averaging 2.03 years, compared with 2.3 years for its peers. Its modified duration came down to 2.07 years in May 2021 from 3.25 years in May 2020, reducing the interest rate sensitivity of the portfolio.

Portfolio analysis

The fund’s allocation to non-convertible debentures and bonds averaged 74.43 per cent over the past three years. Exposure to money market securities (certificates of deposit and commercial papers) averaged 0.99 per cent during this period.

The fund has predominantly invested in the highest-rated (AAA/A1+) securities in the past three years, with an average exposure of 71.54 per cent, compared with 76.32 per cent by its peers. Allocation to AA/AA+/AA- rated securities averaged 5.35 per cent for the fund, compared with 4 per cent for its peers. The fund maintained higher allocation to government securities (averaging 18.09 per cent) than its peers (10.51 per cent).