Change in US rate cut expectations on the back of weakening data can be good news for our markets as well, as the global sentiment is shifting towards rate cuts rather than higher-for-longer.
Prashant believes this is a good time to buy short term bond funds as they can benefit from the coming rate cut cycle.
He has positioned the Baroda BNP Paribas Short Term Fund to gain alpha from two sources: astute duration management within the regulatory guardrails and 15% of the portfolio invested in higher yielding AA securities to enhance portfolio yield.
He agrees that astute and agile HNIs can try and time the cycle by investing now in longer duration funds and then switch to short term funds once the rate cut cycle commences. That however is also what a dynamic bond fund does – so you are perhaps better off investing there rather than attempting to do it yourself.
For the larger segment of investors who are parking money aside for 1-3 years ahead of a planned expense/outflow, short term funds are most suitable.
Prashant is very excited about the new SEBI consultative paper on Investment Strategies as this will enable fund houses to offer a wide range of credit related products with appropriate asset-liability matching to more experienced investors – who moved away to AIFs after the last credit crisis.