Mutual Funds

ABSL Medium Term Fund tops the charts with 23% returns in 2022

Aditya Birla Sun Life Medium Term Fund is in the spotlight after the scheme started topping the return charts in the last two months with 20% plus returns. The scheme has offered 17.38% in one month, compared to 2.46% average returns offered by the medium duration fund category.

In the last six months, the scheme has offered 17.37% returns and 24.22% in one year. The scheme is topping the return charts in all time frames from short to long term on the basis of trailing returns. The scheme has offered 23.18% returns YTD.

Like many other debt mutual fund schemes, the fund has gone through a bad phase in 2019 amid the credit crisis in the debt market. Some papers in the portfolio were downgraded to a very low price. Some of those papers are making repayments and that is now pushing the returns up. Here’s a look at the sharp spike in returns.

absl graphET Online

Source: Value Research (Blue line- ABSL Medium Duration Fund; Red line- category average)


Here’s a look at the scheme’s year on year performance since 2014.

absl2ET Online

Source: Value Research

The YTM of the fund as on August 31 is approx 7.48%. The fund has received some recovery money from marked down papers of Jharkhand Road Project Implementation Co Ltd. The majority of the exposure of this security was sold at Rs 76.2 in July against the valuation of Rs 29 in its books causing a sharp surge in NAV.

“ABSL Medium Term Fund is an actively managed fund with a core portfolio of Credit and a Satellite of duration bonds. In the past 3 months, the returns have been seen due to nimble duration calls and recoveries from sale of one of the marked down papers which was sold at a better price,” says A Balasubramanian, MD & CEO, Aditya Birla Sun Life Mutual Fund.

Mutual fund advisors say that investors should not look at the sharp surge in NAV and get into the scheme. They suggest that investing in medium duration funds can be tricky and investors should align their investments with their investment horizon and risk appetite. They also say that there are a lot of other good options in the category that investors can consider.

“We think that this scheme is appropriate for investors who have a higher risk tolerance as approximately one third of the portfolio is allocated to below highest quality rated assets and it also has a fairly high expense ratio,” says Vishal Dhawan.


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