Fund Pick: Aditya Birla Sun Life Short Term Fund a consistent outperformer

Aggressive approach to outperformance

Aditya Birla Sun Life Short Term Fund, launched in May 2003, has featured in the top 30 percentile of the short-duration fund category of CRISIL Mutual Fund Ranking (CMFR) for three consecutive quarters through September 2022.
 
Kaustubh Gupta, Mohit Sharma, and Dhaval Joshi have been managing the fund since September 2014, August 2020, and November 2022, respectively.
 
The fund’s month-end assets under management stood at Rs 5,665 crore in November 2022, up from Rs 3,188 crore in November 2019.
 
The fund targets income generation and capital appreciation by investing 100 per cent of the corpus in a diversified portfolio of debt and money-market securities.
 
Consistent performance
 
The fund consistently outperformed its peers (funds ranked under the short-duration fund category in CMFR in September 2022) over the trailing periods under analysis.
 
An investment of Rs 10,000 in the fund on November 1, 2007, (inception of the regular plan of the fund) would have grown to Rs 32,596 on December 28, 2022, at a compound annual growth rate (CAGR) of 8.12 per cent.By comparison, the same investment in the category would have grown to Rs 30,093, at a CAGR of 7.55 per cent.
 
Duration management
 
During the past 12 months, as yields of government securities (G-secs) increased, the fund largely maintained its modified duration to reduce exposure to interest-rate risk.
 
It increased its modified duration slightly to 1.8 years in November 2022, from 1.76 years in December 2021. The modified duration for the category decreased to 1.73 years, from 1.76 years.
 
Portfolio analysis
 
During the past three years, the fund had predominant exposure to non-convertible debentures and bonds of financial institutions, averaging 69.13 per cent. Its exposure to G-secs averaged 20.07 per cent, and to cash and equivalents averaged 3.27 per cent.
 
The fund maintained an aggressive credit profile in the past 12 months. It has allocated predominantly to the highest-rated securities (‘AAA’ and ‘A1+’) and sovereign bonds. Its exposure to ‘AAA’ and ‘A1+’ securities averaged 59.25 per cent.
 
The fund’s exposure to sovereign securities averaged 19.08 per cent, lower than the category’s 23.77 per cent. Its exposure to sub-‘AAA’ securities averaged 16.2 per cent, higher than the category’s 5.56 per cent.