HDFC Short Term Opportunities Fund - Rating & Review - Good Investment

HDFC Short Term Opportunities Fund – Rating & Review – Good Investment

Roboadviso     Mutual Funds Rating     Posted On, Mon 31st July, 2017     No comments
Rate
  • Editor Rating
  • Rated 4.5 stars
  • 90%

  • HDFC Short Term Opportunities Fund
  • Reviewed by:
  • Published on:
  • Last modified: July 31, 2017

HDFC Short Term Opportunities Fund is an open-ended short-term income fund. The main objective of the scheme is to create regular income via investments in Government securities and money market and debt instruments with maturity periods of less than 30 months.

The investments are in securitized debt and other high credit quality debt securities so as to minimize credit and liquidity risk. The fund is ideal for those investors who are seeking regular steady income over the short to medium term and who wish to park their money in Government securities and money market/debt instruments with low average maturity. You may opt for this scheme so as to avail the benefits of higher interest rates in the short duration papers.

Presented below is a comprehensive review of this fund which will provide you with all the necessary information that you need to make a better choice about whether to buy, sell, or hold this fund.

Basic costs and other information

HDFC Short Term Opportunities Fund was launched on Jun 25, 2010. From the time of launch, this fund has been a success and popular with investors. As of June 30, 2017, this debt-focused fund has assets of INR 9,411 crores. The minimum required investment for lump sum investment route is INR 5,000, while the Minimum Withdrawal limit is INR 500.

The expense ratio as of 30th June 2017 is 0.37 percent. There is no exit load, i.e., it is zero percent.

Anil Bamboli has been the fund manager of HDFC Short Term Opportunities Fund since June 2010. He holds a Masters degree in Management Studies (Finance) and is a graduate from ICWAI in Cost and Works Accountant. He is also a CFA from USA’s Association for Investment Management and Research. Before he joined HDFC AMC he worked for 11 years with SBI Fund Management. Other funds managed by him include HDFC High Interest Fund – Dynamic Plan; HDFC Regular Savings Fund; HDFC Equity Savings Fund; HDFC Multiple Yield Fund – Plan 2005; HDFC Gilt Fund – Long Term Plan/Short Term Plan; HDFC Cash Management Fund – Call Plan/Savings Plan; HDFC Banking and PSU Debt Fund – Regular Plan.

Allocation of the fund

As of 30th June 2017, the fund’s allocation stands as 98.18 percent in debt, 1.78% in Cash/Call, and 0.04% in money market. As of June 30, 2017, the focus of the fund’s portfolio is on instruments like debentures, bonds, and state development loans.

As of Jun 30, 2017, the top 6 instruments that make up the fund portfolio include ONGC Petro Additions 2019-Debenture (6.26%); Indiabulls Housing Finance 2019-Debenture (5.46%); National Bank Agr. Rur. Devp 2019-Debenture (4.26%); HDFC 2019-Bonds/Debentures (2.55%); Reliance Jio Infocomm 2018-Debenture (2.43%); and HDFC 2018-Bonds/Debentures (2.41%).

Performance

As of July 14, 2017, HDFC Short Term Opportunities Fund has produced a 9.08 percent per annum return on investment in the last 5-year period. This shows that the fund beat the category average of 8.84 percent for the same period. From the time of launch the fund has delivered 9.03 percent per annum returns.

In the past 3-month, and 1 and 3 years period, the fund has shown 2.14, 8.39, and 8.99 percent returns respectively. The fund has thus marginally underperformed vis-à-vis the category, on 3 and 1 year periods.

As per data of the past 3 years, the fund’s standard deviation, i.e., the volatility of the returns of the fund vis-à-vis its average, is 0.86% as of 30th June 2017. This is lower than the category average which is 1.43% for the same period. 

When the returns of HDFC Short Term Opportunities Fund are compared with its peers during the past 5 year period, then at 9.08 percent returns it has performed somewhat better than other similar funds like Baroda Pioneer Short Term Bond Fund (8.98%) and BOI AXA Short Term Income Fund – Regular Plan (8.65%), and marginally worse than Franklin India Low Duration Fund (9.76%). When looking at the fund’s returns from a 3-year perspective, then the returns of other funds in the category are marginally better than HDFC Short Term Opportunities Fund returns of 8.99%. It however marginally outperformed Indiabulls Short Term Fund – Regular Plan (8.80%) during this period.

Analysis

Over the course of the fund’s existence, the allocation of assets and the average maturity period of the portfolio have been strategically changed keeping in mind the sensitivity towards risk of interest rates. The short term interest rates were high during the period between launch and August 2012. During this period, the portfolio had an average maturity period of 44 days with investments in only CPs/commercial paper and CDs/certificates of deposit. The allocation to CDs increased when their returns began rising.

After September 2012, the average exposure of the fund to CPs and CDs were decreased to 13 percent and the portfolio comprised of nearly 80 percent investment in bonds and NCDs. Since the short-term rates of interest were supposed to fall, the fund increased the portfolio’s average maturity period to 1.47 years during this period. Also, there was no investment in government securities during this period.

The fund has always maintained an average of more than 80 percent exposure in the highest rated papers. There has been no investment in instruments with a rating that is lower than an AA category.

Should I sell, buy, or hold?

HDFC Short Term Opportunities Fund is a scheme that offers higher payoffs as compared to the amount of risks involved. The fund has shown consistent and strong performance for the past several years, which makes it one of the top leaders in its category. We give it our approval and our suggestion to all investors is – “Buy.”

 

Pros

Excellent Fund Manager
Excellent Fund House
Excellent Risk Adjusted Return
Excellent Consistency
Excellent Fund Size
Low Expense Ratio

Cons

Overall return is good but not among the top

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