Transcript of Chat with Mr.Ramanathan K ,Asst vice president, Fixed Income/Fund Manager,Birla Sun Life MF - 16th August 2002
[04:24:55 PM] => Myiris: Welcome to the live chat session.
[04:26:00 PM] => Myiris: Our guest today is Mr Ramanathan K � Assistant Vice-President, � Fixed Income/Fund Manager � Birla Sun Life MF.
[04:26:43 PM] => At the time of this conversation/chat, Mr Ramanathan may or may not have positions in the stocks mentioned below, although holdings may change at any time. The views expressed by Mr Ramanathan are based upon information that he considers reliable, but does not represent that it is accurate or complete, and it should not be relied upon as such. Mr Ramanathan, his company and its affiliates, officers, directors, partners, and employees may, from time to time, have long or short positions in, buy or sell and deal as principal in the securities, or derivatives thereof, of companies mentioned herein and may take positions inconsistent with the views expressed.
[04:29:15 PM] => None of the information contained herein constitutes, or is intended to constitute a recommendation of any particular security or trading strategy or a determination that any security or trading strategy is suitable for any specific person. To the extent any of the information contained herein may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. You should consult with and rely upon your own advisors whether and how to use such information in making any investment decision.
[04:29:30 PM] => Lastly the views expressed by Mr Ramanathan have no bearing whatsoever with that of IRIS Ltd. IRIS does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. IRIS especially states that it has no financial liability whatsoever to any user on account of the use of information provided on its website www.myiris.com.
[04:29:53 PM] => Myiris: Welcome to the chat session, Mr Ramanathan.
[04:30:47 PM] => Maheshs: Do you feel the present 5-year corporate yields will come down further? If so, what is your advise to income fund investors? Short-term or medium-term?
[04:31:46 PM] => KR: Investment horizon in an income fund should be at least 6 months. In the short term we expect interest rates to remain soft. There might be some volatility due to profit booking or due to announcement of OMO operations by RBI to suck out liquidity, but the volatility will not be very significant. My advice would be stay invested. Do not look at marginal day-to-day short term fluctuations. Look at the broad interest rate outlook which is expected to be soft at least in the short to medium term and stick to your investment horizon unless there is a very compelling reason to move out.
[04:32:52 PM] => Corporate spreads have come down by about 100 bps in the past three months. We expect the spread to remain around 100 bps for the AAA segment. Corporate yields may drop down further if there is a repo rate cut.
[04:33:58 PM] => sanil_kp: How are bond markets expected to perform?
[04:34:55 PM] => KR: Yields should move in a narrow range going forward. There is a possibility of yields dropping further by 25 bps if the liquidity overhang continues. As of now we do not foresee a reason why the surplus liquidity situation should not continue at least for the next 3-4 months.
[04:35:46 PM] => Acabhattamit: Is it the right time to invest in G-secs?
[04:37:55 PM] => KR: I presume you are asking 'Is it a right time to invest in Gilt funds'. Yes it is provided you have an investment horizon of at least 6 months. There might be short term volatility due to reasons mentioned earlier but volatility evens out over a period of time.
[04:38:58 PM] => rajasekaranpadmanaban: Can income funds give more than 12% this year?
[04:40:56 PM] => KR: No. One should invest today with a return expectation of 8-8.5%.
[04:41:57 PM] => SS36: Can gilt funds sustain their returns?
[04:44:32 PM] => KR: Please do not expect supernormal return of the past to continue in future. Returns expectations of gilt funds going forward should be around 8-8.5%.
[04:45:06 PM] => Guest: Please tell me about your portfolio allocation?
[04:46:51 PM] => KR: In Birla Income Plus we have around 38% in Government securities, about 7% in call money and the remaining in corporate papers. Asset quality-wise we have about 91% in AAA/P1+/G-Secs/Call and the remaining in top quality AA names. The average maturity of the portfolio is around 5.8 years.
[04:47:56 PM] => Ratan: Does Birla offer any gilt schemes?
[04:49:36 PM] => KR: Yes. We have 'Birla Gilt Plus' which is the gilt scheme. This scheme offers 3 plans - the 'short-term plan, the 'PF plan' and the 'long-term plan'. We would be more than happy to assist you in choosing the right plan/fund for you. You can call us on 2379999 and speak to any of our marketing executives.
[04:50:00 PM] => NG76: What is your outlook on interest rates?
[04:50:52 PM] => KR: We expect interest rates to remain soft going forward. There is surplus liquIdity, good forex reserves, credit pick up is only marginal and core inflation (excluding food and energy) would be benign. All these are positive for the bond markets and interest rates.
[04:51:53 PM] => Raghu: Do you think debt funds can repeat last year`s performance?
[04:53:47 PM] => KR: No. Please don`t expect supernormal returns of the last year. Birla Income Plus should give around 8-8.5% going forward.
[04:55:01 PM] => Raghu: Are balanced funds the best option?
[04:56:06 PM] => KR: Considering the valuations in the equity market and the low interest rate scenario Monthly Income Plans and Balance funds are an attractive option today.
[04:57:11 PM] => Hariharan: What target returns are you planning for Birla MIP?
[04:58:14 PM] => KR: We expect returns of around 9-9.5% in Birla MIP going forward. The investment horizon should be atleast 6 months to 1 year. The fund`s competetive and absolute performance has been good.
[04:59:00 PM] => Major54: Can you tell me current cash levels in each of your funds?
[05:00:50 PM] => KR: The below are the exposure in 'call money and MIBOR linked instruments with overnight put call' for various debt funds in our portfolio:
[05:01:56 PM] => Birla Income Plus - 7%, Birla MIP - 6.5%, Birla Bond Plus - 25%, Birla Cash Plus - 12%, Birla Gilt Plus (long-term plan) - 4%.
[05:03:52 PM] => Gopinath: Could you elaborate on your investment philosophy?
[05:04:53 PM] => KR: Our investment philosophy is to give superior risk adjusted returns on a consistent basis through a research driven investment process. Every word of this philosophy is important to us. Our focus is on risk adjusted returns. A fund manager can take higher risk (either credit or duration)and give higher returns. But if you see the quality of the portfolio you would notice that we are conservative on credit risk. While we do take duration calls these calls are based on thorough macro-economic research and on interest rate views rather than pure trading. We have a six member team which comprises of credit specialists, an economist and market specialists. It is this team that looks into the various aspects of portfolio management to take informed, well-researched calls.
[05:08:35 PM] => Mayur54: In a debt portfolio, what things does a fund manager look at?
[05:13:03 PM] => KR: The broad parameters which one looks at while managing a debt portfolio are � (i) asset allocation � component (% of the portfolio) and duration of G-secs and corporate portfolio (ii) maintenance of cash levels (iii) credit quality of the corporate portfolio (iv) liquidity of the portfolio (v) macro-economic research and interest rate outlook predictions which leads to determining the duration of the portfolio.
[05:19:01 PM] => pradeep: Considering that inflation doubled from the levels in June till present, do you see the trend continuing? If it does, what will happen to yields on corporate paper and G-secs? How viable is the present bank rate of 6.50% then?
[05:22:38 PM] => KR: The RBI typically looks at core inflation (excluding food and energy). While headline point-to-point inflation has moved up due to increase in primary article prices as well as due to the base effect, core inflation still remains comfortable. We do not see a pressure on core manufacturing inflation as most of the industries have excess capacity and hence have poor pricing flexibility. As far as inflation in primary articles is concerned, at least as far as rice and wheat go, there is ample foodgrain reserves which can be used in case of shortfall. This should have a salutary effect at least on this component of inflation.
[05:23:22 PM] => HG65 : Are there any parameters by which one can judge funds besides their returns or portfolios?
[05:23:42 PM] => KR: Credit quality of the portfolio, Volatility of returns, Upgrade and downgrade calls taken by the fund manager, deftness in managing duration are some of the parameters besides returns which one should judge the funds on.
[05:26:09 PM] => Paul G: What time horizons do you keep in your mind before putting money in gilts/corporate bonds?
[05:26:19 PM] => KR: An investor in income or gilt funds should look at at least 6 months horizon.
[05:26:33 PM] => Rajiv : How would you compare the performance of your debt funds vis-a-vis your competition?
[05:28:00 PM] => KR: The performance of our debt funds has been in the top quartile. Birla Income Plus and Birla Gilt Plus (long-term plan) have been ranked CPR 2 (on a scale of CPR 1 to CPR 5, CPR 1 being the highest rank) by Crisil.
[05:28:17 PM] => Rekha A: How do you see the future of liquid funds in the long-run?
[05:28:38 PM] => KR: Liquid funds have very good growth potential. As a retail investor why would you invest in a savings bank which gives around 3.5% when you have the investment option of Birla Cash Plus which can give you around 6.5-7%. For corporates it is a good treasury management tool as redemptions are paid in 24 hrs. So instead of keeping money in the current account the corporate is better off investing that money even for a few days in liquid funds and getting that additional return and that too with adequate safety.
[05:28:49 PM] => Bina Murali : Are you happy with the performance of Birla MIP? Whats been the return like?
[05:29:06 PM] => KR: Birla MIP has performed well and is in the top quartile in terms of performance vis-a-vis its competitive funds. Historical returns for 6 months has been around 9.2% and for the past 1 year the fund has returned about 13.9%. One should expect about 9-9.5% from Birla MIP going forward and the investment horizon should be at least 6 months to 1 year.
[05:29:38 PM] => Arun R : What are the advantAges of MIPs in today's market? Isn't this the right time to invest in equities?
[05:30:24 PM] => KR: Considering the low interest rate scenario, MIPs have become an attractive investment option due to a small dose of equities which it has. This should give the additional kicker in terms of returns. Of course, the investor should look at an investment horizon of at least six months to a year if he is investing in MIP. Dynamic portfolio rebalancing helps in reducing losses in equities and the equity portfolio is also managed conservatively compared to a pure equity fund.
[05:30:59 PM] => Ramaprasad: Have softening interest rates attracted more investors to MIPs?
[05:32:39 PM] => KR: Yes, in the past three months, good money has come into Birla MIP. The current fund size is around Rs 114 crore and it has almost doubled in the past four months.
[05:32:58 PM] => Myiris: That�s the end of the chat session for today.
[05:33:47 PM] => Myiris: Thank you all for logging on and posting your questions.
[05:37:13 PM] => Myiris: We thank Mr Ramanathan K, Assistant Vice-President � Fixed Income/Fund Manager, Birla Sun Life Mutual Fund for his time and valuable inputs.
[05:37:24 PM] => Myiris: Have a great weekend. Bye for now.
