Mr R Sivakumar
Head – Fixed Income. Axis MF
R Sivakumar is the Head – Fixed Income at Axis AMC. Siva has over two decades of experience in the Indian asset management industry working across asset classes and functions. He was part of the start up team at Axis joining in August 2009 looking after products and portfolio management services. He was responsible for leading the launch of Axis' signature & award-winning hybrid funds. In September 2010 he was promoted to Head - Fixed Income. He is responsible for the overall investment strategy, performance and risk management across fixed income investments.
Prior to Axis AMC, he was associated with Fortis Investments (formerly ABN AMRO AMC) where he held multiple positions chiefly as a Fund Manager - Fixed Income. He also led products, and - in 2009 - was appointed Chief Operating Officer becoming the youngest person in the asset management industry in that role. He has also worked with Sundaram AMC as Fund Manager – Fixed Income and with Zurich India AMC as Research Analyst.
Qualification: - Bachelor of Technology from IIT Madras, PGDM from IIM Ahmedabad
Q: What are your views on fixed income market?
Answer: The narrative around Indian economics has shifted from inflation to growth today. Given the current inflation trajectory, policymakers and the government are reasonably comfortable with inflation in the economy. The concerns today revolve around flagging growth and measures needed stimulate growth whilst maintaining the fiscal prudence. The RBI has been reducing the real rate by cutting policy rates in an attempt to prop up growth. However, sticky transmission has limited the impact of policy action. In a surplus liquidity environment, the spread between short term rates, which continue to remain elevated (between 75-100bps over the operative rate), are likely to see a natural compression. This compression can be used as an opportunity by investors to deploy funds in the short term strategies.
Q: How have the yields moved and which direction you see them moving in near to mid-term and why? What will the key driving factors for yields?
Answer: Long bonds have rallied, in line with larger global trends and has pre-empted policy action accurately over the last few months. The latest round of policy action came with a subtle indication that we could see an end to the rate cut cycle in the near term. Considering benign inflation and weak economic and industrial production numbers, we believe the game in the long bonds segment has largely played out. Incremental gains are likely to be limited. Government action to boost investor confidence and consumer sentiment will play a big role in driving markets from here on. It will also be interesting to see the fiscal math as the year goes on and how the government manages to dole out incentives to revive growth without compromising on its fiscal commitment.
Q: What is your strategy for short term funds? What are the products /segments you investing in?
Answer: On a risk reward basis, we prefer the shorter end of the curve and believe credits offer an attractive opportunity in the current set up especially on the AA curve. Given the RBI’s diktat to banks to ensure transmission of rates and the current surplus liquidity environment, we see a natural compression in spreads especially across short bonds. Furthermore, In line with a typical late stage rate cute cycle movement, bond yield curves saw significant steepening at the short end of the curve. This makes short bonds attractive in the near term, in our view.
Q: What is the nature of your exposure/investments in long term funds? How are you managing the credit risks and ensuring quality portfolio?
Answer: Our long bond funds and dynamic bond funds have seen an increase in duration over the last couple of months. The move is largely tactical in nature given the current environment. The duration play has been implemented through government long bonds. We do not believe in adding duration through credit. Our credit exposures are largely in the short tenor space for 2 reasons –Liquidity & Diversification.
Our investment philosophy in debt revolves around the concept of self-liquidating assets and diversification. By self-liquidating we mean that the paper matures over time and funds get redeployed frequently thus keeping a duration risk to a minimum. This coupled with adequate diversification keeps our portfolio flexible and risk efficient without compromising on return potential. This has worked well for us given the current context and market environment.
Q: Many conservative debt investors are today even a bit worried on investing in very short term /liquid debt funds. What would be your advice to them?
Answer: This is understandable given the quantum of ratings downgrades and defaults the Indian debt space has seen in the aftermath of the IL&FS saga. What investors need to understand that diversification and risk management play an important role in managing an effective cycle agnostic portfolio. Principles of diversification, not only at issuer levels but also at group levels should be adhered to avoid large credit losses to investors. At Axis, this has been a cornerstone of our portfolio construction process. This has helped us limit exposures to sensitive borrowers especially in this tumultuous period of market uncertainty.
Q: What is your advice to the debt investors at this point of time? Where should they invest with medium to long term investment horizons?
Answer: As I mentioned earlier, in the current set up, short term strategies and credits remain attractively priced as investors hunt for risk adjusted yield. Investing in debt mutual funds is not a risk free investment. While evaluating funds, one must evaluate funds not only on past performance but also the fund house’s ability to manage and maintain risk.
Disclaimer: Past performance may or may not be sustained in the future. Sector(s) / Stock(s) / Issuer(s) mentioned above are for the purpose of disclosure of the portfolio of the Scheme(s) and should not be construed as recommendation. The fund manager(s) may or may not choose to hold the stock mentioned, from time to time. Investors are requested to consult their financial, tax and other advisors before taking any investment decision(s).
Statutory Details: Axis Mutual Fund has been established as a Trust under the Indian Trusts Act, 1882, sponsored by Axis Bank Ltd. (liability restricted to Rs. 1 Lakh). Trustee: Axis Mutual Fund Trustee Ltd. Investment Manager: Axis Asset Management Co. Ltd. (the AMC)
Risk Factors: Axis Bank Limited is not liable or responsible for any loss or shortfall resulting from the operation of the scheme. This document represents the views of Axis Asset Management Co. Ltd. and must not be taken as the basis for an investment decision. Neither Axis Mutual Fund, Axis Mutual Fund Trustee Limited nor Axis Asset Management Company Limited, its Directors or associates shall be liable for any damages including lost revenue or lost profits that may arise from the use of the information contained herein. No representation or warranty is made as to the accuracy, completeness or fairness of the information and opinions contained herein. The AMC reserves the right to make modifications and alterations to this statement as may be required from time to time.
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