An asset allocation framework for debt mutual funds with Suyash Choudhary. Head - Fixed Income at IDFC mutual fund

When investors are building their portfolios and figuring their asset allocation, they spend a disproportionate amount of time choosing the right equity funds. And they often take debt allocation for granted. Since the IL&FS crisis, we have seen a series of issues in several big debt funds and investors have lost a lot of money.

This only goes to show that getting the debt asset allocation is equally important. We had a lot of conversations on the importance of debt in a portfolio on Zerodha Educate earlier. But in this absolutely brilliant conversation, Suyash Choudhary. Head - Fixed Income at IDFC Asset Management, explains how you can use a core and satellite framework to build your debt portfolio and avoid the various pitfalls.


Very informative session @MohitMehra

I had a question regarding how bonds issued by state-run PSUs (especially State-run electricity generation/transmission/distribution companies) would fit into the Liquidity/Core/Satellite concept shared in the video?

I checked IDFC’s website and came across a somewhat related Mutual Fund (IDFC Banking & PSU Debt Fund) which was categorized as Core. But when I checked its holdings, there were no state-run PSU’s bonds in it.

Given that state-run PSU bonds come with a quasi-sovereign guarantee and are normally rated A or AA, would they fall into the Core category?

Or would they belong to the Satellite category as recently there have been cases of state-owned companies filing for insolvency due to an inability to service their debts (like AAGL & GSCCL)?

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I am really shocked .
State government file insolvency in NCLT !

in this case ; will the investor get the money ?
The trust on the government is shattered…


I m indeed impressed by u .
Can u pls tell me from where and how do u get info on anything to everything .
What is the source ,besides the Google?

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The answer is context-dependent on things like the duration of your goals, your risk tolerance, capacity and the duration of the bond.

Not all AMCs invest in these.

SDLs come with an implied sovereign guarantee, not sure about state run-PSUs. A lot of these companies have been terribly mismanaged

Most often than not, the yields these papers are trading will give your answer. If they are trading are high over say G-Secs and PSU, that’s a red flag in itself.

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