How are Silverdale Target Return Funds protected from interest rate movements?
Silverdale Target Return Funds are constructed by locking in both the underlying bond yields and the borrowing costs at the time of portfolio construction.
The Fund invests in defined-maturity bonds and hedges its borrowing costs using interest rate swaps (IRS) for the tenure of the Fund. As a result, there is no material asset-liability duration mismatch.
Accordingly, subsequent increases or decreases in interest rates generally have only a temporary mark-to-market impact on the Fund's NAV and are expected to have limited impact on the Fund's targeted return profile, assuming no material credit impairment events.
What is the credit quality of the underlying bonds?
All bonds held in the Silverdale Target Return Funds are rated by at least one internationally recognised credit rating agency, including S&P Global Ratings, Moody's Ratings or Fitch Ratings.
The portfolio is predominantly invested in Investment Grade (BBB- and above) and high-quality High Yield (BB) USD-denominated bonds, with broad diversification across issuers, sectors and countries.
For investors familiar with the Indian bond market, it is important to note that global credit ratings are generally more conservative than domestic Indian ratings due to differences in sovereign ceilings, country risk and rating methodologies. As an illustration, well-established Indian issuers such as JSW Steel, Muthoot Finance and Manappuram Finance are typically rated AA in the domestic INR bond market, while their USD bonds are rated around the BB category by international rating agencies.
For investors familiar with Indian credit ratings, it is important to note that global rating scales are significantly more conservative.
As a broad reference, a BBB-rated global issuer may be broadly comparable to an Indian domestic issuer rated AA/AAA, reflecting differences in sovereign ceilings, country risk and rating methodologies rather than differences in underlying credit quality.
The investment approach focuses on disciplined credit selection, broad diversification, continuous monitoring and prudent portfolio construction rather than concentrated exposure to any single issuer.