Peerless 3-in-1 Fund is a unique product
Thu, Oct 06, 2016
Source : Jeni Shukla, Citrus Interactive

The Peerless 3 in 1 Fund is managed by Mr. Killol Pandya and Mr. Amit Nigam. The fund invests in a portfolio of fixed income securities, Gold ETFs of other mutual funds and gold related instruments and Equity & Equity related Instruments.


The Citrus Interactive team has tried getting some insights from the Fund Managers on this fund which seems suitable for conservative investors.


What is the investment philosophy and fund management style of Peerless 3 in 1 Fund?

The investment philosophy of Peerless 3-in-1 Fund is to provide investors with an opportunity to generate long term capital appreciation with reduced volatility through a portfolio of Debt, Equity and Gold invested in a ratio as derived by our proprietary study.

The different asset classes are passive allocations (in a particular ratio) while the stocks/ instruments selection is done actively based on the strength of business model of the company, growth opportunity of the business and quality of management.


How is the fund different from other asset allocation funds in the market?

Peerless 3-in-1 Fund is a unique product where we invest across 3 assets Debt, Equity and Gold in a mix of 60%:20%:20% respectively, rebalanced at the end of every month to the same ratio so as to adjust for relative movement between the three asset classes


How is the debt portion of the fund managed? What is the interest rate sensitivity of the debt allocation?

In line with our investment strategy for other asset classes in the 3 in 1 fund, we do not take a cash call in the debt component. (i.e – inflows are as far as possible, always fully invested as per scheme asset allocation pattern across all 3 asset classes including debt). The investment in the debt component is a combination of sovereign securities and corporate bonds. The instrument mix depends on our interest rates view, market conditions and ranges from 50:50 to 70:30. In corporate bonds we strive to maintain the credit quality at a high level. In sovereign bonds, we largely take duration calls rather than engage in trading as a strategy, though at a tactical level, some trading is done by us if the opportunity presents itself.

The interest rate sensitivity in bonds is represented by the modified duration. Currently, the modified duration of the debt component of the 3 in 1 scheme stands at 3.65


How is the equity portion of the fund managed? Will it have a tilt towards particular market cap(s)?

The equity portion is managed in a manner similar to our large cap Peerless Equity Fund where we tend to own predominantly bigger companies (hence larger capitalizations) with some exposure to mid-sized companies (mid-capitalizations). We invest in those companies which have a good business model and have an opportunity to scale up the business. We also lay a lot of attention on the quality of management both in terms of ability and care for minority shareholders.


Usually asset allocation funds underperform in a stock market rally. What should an investor expect from this fund?

Our study of previous almost 14 year suggests that this product has offered high single digit returns (post expenses) across market cycles. The previous 14 years have captured the bull and bear market phases of all 3 asset classes at different times. This is a hybrid fund and therefore comparing it with a pure equity fund during stock market rally would not be fair (as equity component is restricted to ~20% at all times).


What is the current view of the fund house on the three asset classes from a 1-year perspective?

While investing in this fund we do not form a view on any of the 3 asset classes. To us, the risk return profile of Peerless 3-in-1 is an outcome of the interplay of all 3 assets together in a particular mix (60% Debt, 20% Equity and 20% Gold). While managing the debt and equity portions the endeavour is to choose stocks/ instruments of those companies which have a good business and have a proven track record in terms of profitability and corporate governance.


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