Be greedy when others are fearful and vice versa is a maxim that has helped Manish Banthia, senior fund manager–fixed income at ICICI Prudential AMC, beat the market and peers over the last year. The money manager, who runs three debt schemes with a corpus of Rs 8,000 crore, delivered returns in the range of 9.3 per cent to 14.7 per cent for the period July 2018 to June of 2019.
Understanding the behavioural patterns, especially when they swing from optimism and pessimism, creates opportunities across assets classes, and debt is no exception. An example of the same was interest in credit risk funds during 2016-18, especially after demonetisation when liquidity was abundant, people were less risk averse and money flowed into credit funds.testing.. we are here....
“People thought that while AAA bonds gives you low returns, it is simpler to invest in funds with higher yield-to-maturity (YTMs) and generate higher returns. This thought process caught up with investors who only talked about YTMs rather than analysing the underlying quality. However, these behavioural patterns are where most of the mistakes are made,” Banthia says.
The best strategy now, according to him, is to be greedy when others are fearful. “Earlier, investors were euphoric and optimistic, they are now pessimistic. This is the best time to take risk in the credit asset,” he says. The fund house is positive on credit as an asset class. Even in the All Seasons Bond Fund, while in 2016-17, the fund house had 100 per cent invested in high quality AAA-rated assets and government securities, now they have 50 per cent of the portfolio in AA-rated bonds.
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