SBI Dynamic Bond Regular Growth INF200K01958

It employs a bottom-up investment approach with a top-down overlay to generate superior risk-adjusted returns. A top-down approach guides portfolio positioning around predetermined risk parameters by assessing gross domestic product/ inflation, monetary/ fiscal policy, interest rate, liquidity, yield curve, credit spread, and so on, while the intensive bottom-up credit research uses an in-house model for security selection.

The managers use various qualitative and quantitative parameters and put a lot of emphasis on the company's management, business, and financial health. They also use the analysis of sell-side research and credit-rating agencies to form a view on the creditworthiness of companies, but to a limited extent. While constructing the portfolio, the managers have the flexibility to implement trades with reasonable leeway to express their views. The risk-management team also periodically reviews the portfolio to ensure that the portfolio managers adhere to the guidelines.

Although Rajeev Radhakrishnan has not deviated from the broad investment mandate, he has his own distinctive investment style. He is relatively less active in managing duration calls, leading us to be cautious about the team's execution skills compared with the previous manager, who had a proven edge in actively managing the fund.

The fund is well-positioned within its defined flexible mandate and moves across the segment actively as the market condition evolves. The team manages duration in a wide band of 1.0-8.0 years and does not shy from having significant exposure to single segments. In the near term, the manager plans to maintain the portfolio duration between 6.5 and 7.25 years but would not hesitate to increase the duration if the interest-rate outlook becomes favorable.

The portfolio is constructed purely based on the underlying instrument's liquidity. Lower credit bets are avoided. It primarily invests in government securities, state development loans, public sector undertaking AAA bonds, and a few nonbanking financials companies with quality names.

The fund occasionally takes tactical positions in extremely long-term debt instruments. In 2021, it adopted a highly conservative approach, maintaining high cash levels and reducing the duration to below one year at times. By March 2024, the fund's duration had increased to as much as 8.5 years because of a high volume of state development loan issuances within a short period. The managers take positions in SDLs when they offer attractive spreads, but these are primarily tactical moves.

Rajeev Radhakrishnan typically avoids private-sector bonds, as it could restrict him from churning the portfolio actively. He may consider investing in a few such bonds, provided there is liquidity and if they are trading at attractive yields.