DSP BlackRock Strategic Bond Fund DSP BlackRock Strategic Bond Fund is the quintessential 'shut and forget, all weather debt fund'. Launched by DSP BlackRock (erstwhile DSP Merrill Lynch) in the year 2007, the fund has witnessed some impressive growth over the past few years. On last count, it's total AUM (Assets Under Management) was a hair's breadth shy of Rs. 3,000 Crores.
PerformanceOver a 3-year period, DSPBR-SBF has delivered an annualized return of 11.26 per cent. The 5-year return stands at 10.22 per cent. That works out to an absolute return (post tax) of close to 33 per cent in a three-year period, after factoring indexation - that's an impressive number for what is essentially a low risk fund.
The fund also steadfastly maintains a low expense ratio of just 1.07 per cent. That's more than 50 bps lower than some of it's close competitors (such as Birla Sun Life Dynamic Bond Fund and UTI Dynamic Bond Fund). All the more reason for investors to cheer.
Fund Management StrategyDSPBR-SBF is jointly managed by Vikram Chopra (Vice President) and Pankaj Sharma (Head - Fixed Income). Chopra has over 14 years of experience in Fund Management and Sharma is an old hand at DSP BlackRock, having been with the firm since 2003, and possessing a total of 23 years of experience in the Fund Management space.
DSPBR-SBF follows a dual strategy, where the portfolio could benefit in one of two ways - reduction in interest rates, and an improvement in the overall credit cycle. The Fund's portfolio is presently positioned in such a way that it could take advantage of the improving credit cycle (the so called 'spread compression' story) and remains invested in duration through government securities.
The funds mandate is flexible in nature; permitting the portfolio manager to invest across the duration spectrum as well as invest in debt instruments which have high probability of upgrades and/or spread compression. Through active portfolio management, the fund manages its portfolio duration based on various fundamental and technical factors.
At present, the fund holds 27 securities, with an average maturity of 9.95 years (which is on the higher side; indicating the Fund Management team's bullish view on interest rates).
Risk Controls & StructureDSP BlackRock has a robust portfolio management team with comprises of a credit team, trading team and portfolio managers. This team works closely with an independent Risk & Quantitative Analysis (RQA) team. This structure provides for robust decision making across credits and rates, and ensures value to each portfolio based on various risk parameters.
Play for the next 12-24 monthsAs per inputs received directly from the Fund Management team, DSPBR-SBF will actively seek to generate returns through credit and duration plays over the next 1-2 years. The fund house remains constructive on rates (as macroeconomic factors such as CPI, CAD, FD, and Demand-Supply remain favorable). In addition, the portfolio will play on credits where the team expects strong improvements in their metrics.
The Bottom LineWe remain positive on DSPBR-SBF. The fund's flexible mandate enables investors to participate through interest rate cycles as well as credit cycles, making it an 'all weather' investment. DSP BlackRock's robust risk control mechanisms will help investors stay favorably positioned on the risk-reward spectrum.
Like most debt funds, DSPBR-SBF is suitable for both institutional clients as well as individuals who are risk averse and need to deploy lump sums for a medium to long term (possibly, as a viable alternative to fixed deposits or bonds). Retired individuals with sudden, large sums of money to deploy will especially benefit from this fund and its style.
A word of caution: don't make the mistake of assuming that DSPBR-SBF is suitable for a short term investment horizon. Enter the fund with a minimum time horizon of three years. That way, you'll benefit from the increased tax efficiency as well.
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