iStockThe fixed income managers at Axis Mutual Fund believe that a prudent mix of AA and AAA / G-Sec strategies will benefit fixed income investors, after the RBI kept interest rates unchanged at its policy meet today.
The fund house offers Axis Strategic Bond Fund with a mix of 50% AA and 50% AAA paper strategy with a Maculay duration of 3.6 years, while Axis Dynamic Bond Fund has a Macaulay duration of 6.6 years with a 100% AAA rated portfolio.
“Short term credits (up to 2 year) offer significant opportunities for active strategies at this juncture as they would mature before the probable rate hike cycle commences,” said the fund house in a note to investors.
The fund house anticipates that the RBI will maintain rates at the current levels for the next 18-24 months. After that, the fund house notes, a gradual rising rate environment will ensue on the back of a recovery in the economy. From here on, investors will be best suited to go up the duration curve which would serve investor needs of a higher risk reward.
In the fixed income space, across portfolios the fund house follows a barbell strategy in which it mixes long duration assets (8-10 year) with ultra-short assets including credits (up to 2 year) to build a desired portfolio maturity. This helps to capture opportunities that lie in the extreme ends of the curve.
The fixed income team believes the policy was a non-event on expected lines.
"We continue to believe that rates are likely to remain range bound and that the rate cut cycle is over,” said the note. The fund managers believe inflation is the only major concern and surplus liquidity is likely to continue till such time growth recovers sustainably.
The fund house offers Axis Strategic Bond Fund with a mix of 50% AA and 50% AAA paper strategy with a Maculay duration of 3.6 years, while Axis Dynamic Bond Fund has a Macaulay duration of 6.6 years with a 100% AAA rated portfolio.
“Short term credits (up to 2 year) offer significant opportunities for active strategies at this juncture as they would mature before the probable rate hike cycle commences,” said the fund house in a note to investors.
The fund house anticipates that the RBI will maintain rates at the current levels for the next 18-24 months. After that, the fund house notes, a gradual rising rate environment will ensue on the back of a recovery in the economy. From here on, investors will be best suited to go up the duration curve which would serve investor needs of a higher risk reward.
In the fixed income space, across portfolios the fund house follows a barbell strategy in which it mixes long duration assets (8-10 year) with ultra-short assets including credits (up to 2 year) to build a desired portfolio maturity. This helps to capture opportunities that lie in the extreme ends of the curve.
The fixed income team believes the policy was a non-event on expected lines.
"We continue to believe that rates are likely to remain range bound and that the rate cut cycle is over,” said the note. The fund managers believe inflation is the only major concern and surplus liquidity is likely to continue till such time growth recovers sustainably.
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