By Morningstar Analysts
Birla Sun Life Government Securities Long Term Growth
This fund invests in a combination of central and state government papers and seeks to add value by managing duration efficiently. While the duration of the fund can change significantly based on management's views on interest-rate directional movements, fund manager Prasad Dhonde also pays heed to the relative spreads between government securities and state development bonds while investing.
There is a lot of focus on the liquidity of the underlying instruments when it comes to G-Secs. While they did not invest in over-20-year securities until 2015, the fund currently has an exposure of around 36% in a single long-dated paper. SDLs, on the other hand, are viewed as tactical investments that are actively traded and can vary significantly in terms of exposure.
Overall, we're impressed with the investment team’s disciplined approach and believe the investment process is well-defined. Our confidence in the strategy has been hampered by its average long-term performance. While the execution has remained satisfactory, the fund could be positively affected by the manager’s ability to efficiently allocate across yield curves rather than trading within similar maturity buckets. The higher expenses on this fund are another concern; its consistently high TER could be a headwind to performance.
Analyst Rating: Though led by a strong team and backed by strong in-house processes, there are a few gaps in its overall showing. A high expense ratio and a mediocre showing in terms of the fund’s long term performance result in a 'Neutral' analyst rating.
Expenses: 1.75%. Significantly higher than the other offerings in the category.
Turnover: 897%
Minimum Investment: 1,000
Credit Quality: High
Interest Rate Sensitivity: Extensive
Performance: The fund’s performance has remained erratic over the long term; higher expense could be a headwind.
Category: Intermediate Government Bond
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