Kotak Medium Term Regular Quarterly Payout of Income Dis cum Cap wdrl INF174K01VM4

The fund maintains a duration between 3.0 and 4.0 years and invests primarily in high-quality, high-yielding assets, balancing duration bets through macroeconomic analysis. The team incorporates insights from internal and external economists, ensuring dynamic and informed portfolio positioning.

Credit analysis is divided into banking, nonbanking financial companies, and manufacturing debt and then further demarcated into three buckets based on business strength, management, and corporate-governance standards. Surveillance has shot up since 2019 after the spate of downgrades; for instance, nonbanking financial companies and housing finance companies, previously evaluated on a quarterly basis, are now tracked monthly. The team also keeps a check on the sponsor debt and evaluates asset-liability profiles on a monthly basis. The fund ensures a well-rounded investment approach by leveraging the expertise of the equity team at Kotak Asset Management Company and Kotak Bank.

A rigorous quantitative framework underpins security selection, incorporating key financial ratios and proprietary risk models. Portfolio manager Deepak Agrawal applies a proprietary exposure limit model, with the risk management team ensuring strict adherence. The team conducts regular client profiling to anticipate liquidity needs, given the category experiences large inflows and outflows. Under the leadership of Nilesh Shah, managing director and industry veteran, the investment process remains comprehensive and well-structured. ensuring a stable and well-balanced fixed-income strategy.

The manager runs the strategy with low to moderate duration and focuses on higher accrual income by investing in high-yielding assets. Relative to its category peers, the fund takes a conservative approach, and some of its risk measures have stood the test of time for a decade. The manager avoids companies with weak disclosure practices; this approach has prevented the fund from holding bonds with the potential for downgrades.

The portfolio is well-diversified, typically holding 50–55 securities. The fund maintains a duration range of 3.0 to 4.0 years, in line with its investment mandate. Over the last one year, the manager had increased the portfolio duration by increasing exposure to sub-AAA assets, adjusting allocations based on market conditions and credit spreads. The fund avoids overexposure to below A rated instruments, capping such holdings at 15% to maintain credit stability. To maintain liquidity, the manager ensures at least one third of assets are in instruments, with a maturity of less than one year.

The fund prioritizes safety and liquidity without compromising heavily on credit quality. Selective A rated investments, such as Uttar Pradesh Power Corporation and public-sector banks, are chosen for their strong promoter backing and sound management. This approach ensures a balance between stability and return generation, though the cautious stance may result in moderate rather than aggressive yield outperformance in bullish credit cycles. While the fund may not always chase the highest yields, its consistent risk controls and liquidity management make it a reliable option for long-term investors.