Birla Sun Life Short Term Fund: A long track record of strong performance

Birla Sun Life Short Term Fund is constantly ranked in the top 30 percentile

Launched in March 1997, Birla Sun Life Short Term Fund is classified under the debt short category of CRISIL Mutual Fund Ranking. The fund has been constantly ranked in the top 30 percentile (CRISIL Fund Rank 1 or 2) over the past nine quarters ended December 2016. 

The fund’s primary objective is to generate income and capital appreciation by investing 100 per cent of the corpus in a diversified portfolio of debt and money market securities. The fund is managed by Prasad Dhonde and had quarterly average assets under management of Rs 15,991 crore at the end of December 2016.

Superior performance

The fund has been a consistent outperformer, outdoing its benchmark (CRISIL Short Term Bond Fund Index) and the peer set (schemes defined under the debt short category of CRISIL Mutual Fund Ranking December 2016) across all periods under analysis.

An investment of Rs 1,000 in the fund on March 31, 2002 would have grown to Rs 3,298 (8.35 per cent CAGR) on February 8, 2017 vis-à-vis Rs 2,981 (7.62 per cent CAGR) in the peer group and Rs 2,849 (7.29 per cent) in benchmark.

A monthly systematic investment plan (SIP) of Rs 1,000 over 10 years (an investment of Rs 1,20,000) would have grown to around Rs 1,90,693, returning 9.06 per cent per annum. A similar investment in the benchmark would have grown to around Rs 1,85,965 returning 8.58 per cent.

Duration management

The fund has been managing its modified duration actively as per the movement in corresponding government security (G-Sec) yield over the last three years. It has increased the modified duration when interest rates were expected to fall and vice versa.

For instance, when G-Sec yield started declining from 7.54 per cent in February 2016 to 6.44 per cent in December 2016, the fund increased its modified duration from 1.73 to 2.42 years compared to the category's 2.12 to 2.30 years in the given time period.

Timely duration management has helped the fund consistently perform better than the benchmark and the category over the past 10 years.

Portfolio analysis

On average, over the past three years, the fund had the highest exposure to non-convertible debentures (NCDs) and bonds (59 per cent), followed by G-Secs (24 per cent). During this period, exposure to G-Secs gradually rose from 9.82 per cent to 25.46 per cent, with subsequent decrement in exposure to NCDs and bonds.

The portfolio is well guarded in terms of credit risk, risk as a result of investments in highest rated debt securities ('AAA/A1+') and G-Secs. Over the past three years, 85 per cent of the debt portfolio has been invested in these papers.

Source: CRISIL Research