Dunkirk - Movie Review

War movies are about hope and heroes. And Dunkirk has both. But it does not preach heroism. If anything, the movie is very low on dialogues. In fact there are not even meaningful glances, hat tips, or gestures of bravado. The movie is a matter-of-fact portrayal of an important chapter of the Second World War. As director Christopher Nolan said: “It was an important story to be told”. And he tells it well. Cerebrally, it is the simplest Nolan movie - this is about the heart and not the mind.

Dunkirk incident is before the Fall of France, the horrors of concentration camps, and the glory at Normandy. In the early part of the war, the British and French forces are pushed to the French north-coast by the advancing German army (just referred to as the ‘enemy’). The soldiers are trapped on the beach of Dunkirk waiting for rescue, or ‘deliverance’ as the movie puts it. The enemy is in such a strong position and the British air and navy so disadvantaged that it is estimated that barely 40,000 out of 400,000 would be evacuated. The fact that by the end, more than 300,000 are evacuated is what is called the Miracle of Dunkirk.

The war is being fought on land, sea and air and the movie makes three neat sections for them with a little joining of dots in the end to give coherence. Each section is headed by a major actor – Kenneth Branagh on land (or the Mole, name given to the pier which extends into the sea), Thomas Hardy in air and Mark Rylance in the sea. It is a movie by a British director, with largely a British crew, showcasing British valour. For the British soldiers, rescue means transportation across the Channel and the movie squarely focuses on them (French army is stopped from boarding the British evacuation ship). ‘Home’ is barely a few miles away and more than one character says ‘It is so close, you can almost see it’.  

The movie is not as hard hitting as a Schindler’s List or a Saving Private Ryan, but neither is it kitschy. It is taut, well-paced and true to the story. And dialogues, being minimal, are punchy. Only towards the end does the sheen of steadfastness crack with indulgence into heroism, giving some lose moments I felt. But that is the path the movie had to take. The first half of the movie is plain, factual and exact, the audience knows that it is not that difficult movie. Then the second half had to give a victory, a lofty pat on the back. In the cinema hall, after the first half, a group near me was totally bored. By the end of the movie, another group could not help but clap when the evacuation succeeded.

Focusing on a few soldiers and their struggle to find a way to safety, Dunkirk presents the tension of those few days tersely. Two soldiers desperately cling onto a medical stretcher as a way to freedom, then on to a large vessel which is torpedoed, then back to Dunkirk, then hiding inside a stranded ship waiting for the tide to come back instead becoming shooting practise for the Germans, then stranded in an oil spill and finally rescued by a small pleasure-boat. But at all times, the tension is under the surface. It can be deduced only from worried faces - of the soldiers, of the Commander on the Mole, of Mr. Dawson on the boat and of Farrier in his Spitfire. Yet everyone holds on to their positions unflinchingly. Only on two occasions does the tension simmer to the surface, which is a far cry from most war movies wherein almost each scene is about conflict – of battle or of people desperate for survival. But Dunkirk goes about its business without fuss. There are numerous shots of long queues of soldiers and how they duck, sway, and shake with each torpedo attack before retaking their position - stoically, and steadfastly. For a war movie, this one has no blood, sweat or tears - neither of desolation nor of loss. Death is not pondered upon. Even towards the end when the Naval Commander wants to stay back on the mole ‘to help the French’, the Army Colonel just makes a respectful gesture before saluting off.

Central to the Dunkirk evacuation was the courage of the humble boat owners who answered Navy’s desperate call for help. And Mark Rylance’s Mr. Dawson exemplified that. He has the most dialogues and the does the most explaining, if at all. I found the ‘Sea’ part the best because of him and because of the courage of young, untrained, patriotic British, epitomised by Peter and George. They were not thinking but just going with the flow, driven by their hearts.

The end part has several beautiful moments – excerpt of the famous Churchill ‘We will fight them on the beaches’ speech; a soldier’s doubt on the worthless endeavour he had undertaken, saying “All we did was survive”, but the old, blind man who is cheering and distributing bread to the evacuated soldiers at night responds “That’s enough”. It showed the combined doggedness of a nation willing to stand together, overlooking personal misfortunes and miseries. The same thing shone when Peter does not tell the evacuated soldier that George has died after he pushed him, because that would torture the soldier for life.   

Finally, a hat tip to the music which can be integral to a movie with few dialogues. Hans Zimmer creates tension and victory with his music.   

A Day in School

It has been 17 years since I left school. In all these years I have been to the school not more than four times. Of the three educational phases in my life - school, college and post graduation, I enjoyed school the most. Being a sincere, hard-working student, I never dreaded school. I enjoyed everything - smell of new books, starting with a fresh register, sharpening pencils, filling ink in pens, buying new pens, creative project work, drawing, cutting, pasting, fevicol on fingers, maths problems, writing on blackboard, making artwork for bulletin board, lunch time, chatting between periods, arguing with teachers, parent-teacher meetings, loitering in school park during lunch time, extensive preparations for the Annual Day, waiting for bus at early morning, sweating in class during summers, helping out friends (partially) during exams, expectation when the exam answer sheets are distributed, all the teachers…

Yet it sounds so brutal and strange that I severed the link with school easily and never turned back. During a music class in my early years (class fifth, sixth or seventh), the music teacher, who was liked by all the students a lot, started to reminisce. During the class, a senior student just ran across the corridor and the teacher saw him from the open door. On seeing him rush past the classroom without a word, the teacher said wistfully something to the effect ‘That boy who just ran past was my student till some years back. When they were attending their last music class, they proclaimed with excitement that we would come and meet you regularly Maam. But nobody ever does. I see him passing the corridor frequently and he never peeps in to say hello’. Hearing this, all we kids thought, and some even said, ‘Don’t worry Maam, we are different, we would definitely come to meet you even after you are no longer teaching us’. But I am sure the teacher, being mature, did not harbour much hopes. And we were too young to know any better.

This was when I was still in school but would rarely go and meet my old teachers. What to say of going back after leaving the school. I know that I paint a picture grimmer than reality for many people - there are many enthusiastic, vivacious people who go back to their alma mater and reconnect with the teachers. But it has been different in my own experience and what I have seen with most of my friends. Sadly for me this has been true not just for school but also for graduation and post graduation. I have never kept touch with the institutions after leaving them. So no place for any sentimentality, it was a purely a commercial transaction - I paid fees and I got education. Mind you, I am not talking about going to the institution in physical sense. I am talking about keeping a connection with people there - the teachers, who at one point were the most important part of my life.

For me, I can say that even when I had the feeling or longing to meet my teachers, I was diffident. Or I felt incapable of handling a situation wherein the teachers would not recognise me. This would have been definitely true with graduation and post-graduation teachers wherein I did not leave much of a mark to be remembered by them. But I am sure my school teachers would have recognised me had I followed up. But I did not. I got too busy making a career and nobody nudged me in that direction. I also thought that teachers may not be interested in keeping any contact and I would be impressing on them unnecessarily. Nevertheless, all these were my mental deterrents but I have seen most of my friends, who I think do not face similar impediments, behave similarly. Very few keep contact with old teachers. I wonder why. Mostly it is the passage of time erasing old memories to make space for new ones, the process of moving on. Also, I believe there is a degree of selfishness. Many people keep contact with the teachers of higher education because they have some relevance - giving referral for a job, mentoring for further education, opening doors to distinguished people in the field, giving opportunities for teaching in the institute, other career prospects etc. But a relatively humble school teacher does not offer any such benefit for future and thus not remembered. Such is the brutal reality of most things in life, most pertinently in the present times.

I have been holding these thoughts for many years. And I have fostered a feeling of incompleteness, of treachery, and of lacking. At the same time I never had any burning desire to correct this. It was not much weight on my conscience. I have attended two alumni meets of my MBA college in last 10 years and never talked to any of the ex-teachers. Even most of the batchmates I have barely acknowledged. I mostly spend time with people I was comfortable with during the student days, remember old acquaintances and show enthusiasm for where they are now, feel nostalgic for the campus and the time spent, and then come home. I always felt uneasy about this attitude but not much. The last alumni I attended with a best friend, and we had a great time, though along the similar lines as I have enumerated above. But he was very animated and kept saying as we were loitering around the campus remembering old days: ‘Gosh! This is so great. So many years gone by. It feels so wonderful. We should come here atleast once a year’. And I had that all-knowing, monk-like, half-smile on my face, saying to myself ‘We shall see’.

But I have had greater longing for my school. Over the last few years I have felt, swayed by the more experiential MBA education, that school education was so bookish. I had so few life-skills, such limited knowledge of career options when I left school. I felt that school children can benefit immensely from experiences of their alumni. I often desired to stand before a class and freely share my thoughts. Indeed I want to do something in the field of education as I feel that I can genuinely contribute. But as is usually the case with me, I have not done much about these desires. Recently, I got to know of an alumni meeting in school. This got me interested and I went for it. While not much, I had expected a reasonable number of ex-students to turn up, at least in double digits. As it happened, there were five of us, three  coming for the first time and out of nostalgic excitement like me. The other two were regular and I came to know that they hold this meeting every month. So we went to a new section of the school where I had not been before. As we were talking amongst ourselves, four teachers joined, two of whom I knew well and thought they also recalled me. But they did not betray any sign of recognition or even if they recognised, they did not show any inclination to talk personally. I felt a bit dejected but did not initiate conversation myself, out of some hesitation.

Anyway, the agenda of the meeting was to plan for an alumni sports day in a month’s time. Apparently, the idea had been under discussion for some time but the two alumni veterans had not been able to cover much ground. What I gathered from the discussion was that the idea was pretty grand and I felt that there was absolutely no preparation to pull it off. At the end of this meeting, the newbies amongst us shared our business cards with the teacher whom I had recognised. She had taught me till my last days in school. As I gave her my card I was expecting some signs of recognition and interest but none came. Again, even if there was recognition there was definitely no interest in knowing how has the life been since our paths diverged. She read my business card and kept it, without any inclination to know more about my organisation or industry. I was dejected.

But why? Had I shared an emotional connect with the teachers, I would have come much earlier. I have been busy, selfish. So why this disappointment? I think for students, school is an important phase of life, when they were impressionable, when most of their thoughts are formed, an age of innocence and unique experiences which make up vivid memories. Students get nostalgic about it and nostalgia is always beautiful. But for teachers, they have always been here only. Students come and go and some come back. The teachers do not share the same sentimentality. I feel the teachers get hardened after years of not being followed up on by their students. It is stupid of me to expect enthusiasm from them after 17 years, when I had not called upon them once. Still I think that I should have at least asked ‘Maam, do you recognise me?’

Moving on, we went to the principal’s room to discuss the event further. I kept thinking that during my 12 years in school I have been inside this room only once, or at most twice. The principal had changed from our times, and from what I had heard, for the worse. Almost unanimous opinion was that the principal at our time was much better and things have definitely gone downhill since he left, although the school still ranked amongst the best in the vicinity. Hearing this principal at close quarters reminded me of meeting with another school principal I had had a few years back as part of my job. There was a similarity about the passion with which they talked. They are so enthusiastic about their work, thinking about the children and how to make their school better. So we had a good half an hour discussion wherein the principal highlighted the need to have more active alumni involvement. This I agreed with wholeheartedly. My school lacks a structured alumni program with strong connections, regular events and contributions from the alumni. Indeed, this has been the case with all my educational institutions. Why me? Am I some sort of a jinx? Or I end up in places where all people have the traits of lethargy, inaction and hesitation just like me. Some kind of ‘Birds of a feather flock together’ working on institutional scale.

The date of the Sports Day was finalised in the meeting and we left the principal’s office. But not before I had given my suggestion of having sessions where alumni talks to the students and shares their experiences in life and careers. Outside the principal’s cabin we alumni huddled in the reception area while the teachers left in a jiffy. Herein I tried to probe from the two active members into the workings of the alumni committee. Skeletons fell out and pole-danced. The fact that the committee was in disjointed shape was apparent to me but I realised that in fact it is more of a concept. I was told that they do not have any representation from many past batches. They had busy lives and alumni activity tended to take to backseat. So nobody was fully committed to the cause. I thought it was obvious, most of them have personal and professional commitments and it is difficult to contribute to a social activity than an urgent requirement. Who was I to judge? I myself had never contributed to a social cause. I wanted to get into that - be part of some management task but was doubting my abilities.

Discussion with these people brought out more rot. They mentioned that school itself was not cooperative. I was aghast to know that the school did not have a comprehensive list of old students, which I thought would have been a good starting place to organise the alumni. I was keen on first having a solid database as foundation on which to build the alumni network. It was mentioned that there is a lot of political tension amongst the teachers and the principal and things are not what they seem on the surface. On the alumni side, there is a feeling that the school itself does not want to connect with them. And also the problem of dis-interest. Students come forward only when they have a benefit to derive - networking or getting admission of their kids.

Overall, this discussion left me bemused. My enthusiasm to contribute was deflated after hearing about these political shenanigans and selfishness behind the whole effort. To add to that, the coldness of the teachers who did not seem much eager to collaborate with the alumni dampened my spirits. The environment was of mutual cynicism. I realised I was naive to expect something totally different. Any group of people is bound to have political interplay which one is required to navigate. I had expected the field of education to be simpler than the corporate world but it was a stupid belief - education sector is also composed of people who have aspirations, biases, motives, and self-interests. Nevertheless, I was most disappointed to note that selfishness is so rampant - I am not able to find any place without it.

In the end, I spent more time with one of my batch mate who was an active alumni. She filled me with more developments and how the school has changed, more like how the thought process had changed. One example of change was that the girls now had to wear salwar-kameez instead of skirts. I asked her with abject displeasure as to why did we (the school that is) get so regressive. She said that it was necessitated because of changing times, hinting at the need to keep a tighter control on adolescent students. I said that romances were common even during our times. She said it has deteriorated significantly, and mentioned CCTV footages. This made me realise my naivety yet again. We reminisced about good old days - about batch mates, about teachers, about how we had simple upbringing, about how we were willing to sweat. Still, some things had changed for the better - students have so much more exposure, career alternatives have multiplied, there was focus on extracurricular activities, and personality development. It was a departure from the bookish, academic focus we had. She mentioned how the teachers have been told to converse in English only as it was felt that our students were inferior in English communication skills and came across as unrefined in comparison to students of other schools. All in all, I left with a queer, dissatisfied feeling. I questioned if I was cut out for all this, for this world! Still I was happy to interact with a new set of people in unfamiliar setting.    

A Cynic's Friendship

Me: What kind of friendships are there?

Not Me: Why do all things have to be labelled?

Me: Why not? I like to label stuff. It makes one reflect, understand and improve. Anyway, it seems to be a good point to start a debate.

Not Me: you would not stop! You tell me. What kind of friendships are there?

Me: I don’t know myself but I ruminate. Fair weather friend is a well-known kind. Then there are those whom you have just for fun, nothing much expected, but they are good to spend some leisure time. Yet another kind would be the agony-aunt or sounding-board types - those who are reliable for a good advice and on odd occasion for a shoulder to cry on. And some friends you keep just to feel superior about - in whose company you don’t feel challenged.

Not Me: interesting! Never thought there would be so many. I only thought of a true friend and a not-true friend.

Me: I am always bemused by the concept of true friend. Is there any such thing?

Not Me: Why not? Why do you say so?

Me: Hmmm… How do I explain? To call something true is to consider it ‘pure’ and in relationships I feel only blood ties can be pure, if at all. Is it possible for a friendship to be selfless? To have no ulterior motive?

Not Me: What motive?

Me: Oh that can be anything. Something trivial like having a good time. Or for intellectual enrichment. Or money. Or greater gains.

Not Me: Oh but why! Why can’t a thing just be?

Me: But what value to give to a thing that just is. Friendship should have some value.

Not Me: It is your own calculative mind. Friendship has a value, but that value is friendship itself. Friendship does not happen to justify any value.

Me: I cannot make sense of that. We chose friends. They are not forced onto us like most relations.

Not Me: But you just said, blood lines are the purest.

Me: Do you not feel the same way yourself? The feelings for mother, father, sister, brother, son, daughter are the strongest.

Not Me: I agree. Our parents are our first human contact and the feeling for them grows because of the love and protection that we get from them. With siblings, love comes from shared traits, growing up together, the comfort of commonality.

Me: And kids!

Not Me: I am not sure where the love for kids originates from? For the mother, possibly it emanates from the pain of pregnancy and childbirth. But more than that I think the love for a kid comes from a sense of protection - when you hold a fragile being, whose eyes are just curious, who cannot walk, who cannot talk, who is trying to make sense of this world - you just want to protect that kid.

Me: I want to ask where does love for a spouse originate, but I do not want to start a sub-argument here.

Not Me: Oh good. Now back to the topic of friendship. Blood lines being pure does not rule out anything else becoming equally pure. Why not friends?

Me: before I proceed, let me add I do not say blood relations are always the purest. Many a times we carry on with them because societal norms force us to. It becomes difficult to admit that you do not have the same warmth.

Not Me: pray do not digress.

Me: alright. I think I am driven in my thoughts by my experiences. Somehow I have always found friendships to have a degree of selfishness, a quid-pro-quo which puts me at discomfort.

Not Me: How unfortunate! I believe friendships originate from an innate desire for companionship. And in that sense there is a mutual affinity.

Me: I do not disagree to that. But that affinity stops at personal wishes and constraints. And thus the friendship does not achieve the selflessness which you so profess.

Not Me: How did you make friends in the first place? Was there always a motive?

Me: No. Consciously I grew closer to certain people whose thoughts I could relate to, whose company I enjoyed, with whom I could have intellectual or emotional oneness.

Not Me: So, there it is. You are talking about true friends, without any motive.

Me: But essentially what I am talking about is having a good time with friends. I always had the impression, possibly due to movies, books and nice catch-phrases that friendship is more. I realised that when I wanted to take my friendships to the next level I could not. I wanted to be able to lean on the other person or even to be his support, but it never happened. I always had a feeling of superficiality about the friendships. Possibility it was something lacking in me.  

Not Me: It may be possible that you expect too much. Why can’t you accept what you get?

Me: I can but what is the fun in that. Let me quote an incident. Long back I was visiting a cousin. While chatting, comparison of respective friends came up. We were trying to get one up on the other. After some jostling, my cousin threw the decisive blow. He asked ‘‘my friend would travel 100 kms to run an errand if I ask him to, would your friend do the same?’ And I had no answer. I agreed that such a thing would not happen. Now this cousin lived in a small town, kind of where you know most people. I sensed in smaller places, people have lesser complex personal lives, more mental and physical bandwidth.  

Not Me: So now you are saying that purity of friendship varies according to the place?

Me: All I am saying is that in my experience I have found that big city life has its own pressures, it is so energy sapping, and that it becomes difficult to accommodate somebody else when you are barely able to meet your own needs.

Not Me: I believe you have been misguided by your poor experiences. Or possibly you yourself never invested into a friendship truly.

Me: I am perplexed. I feel I have always tried a lot. Indeed I have seen people have beautiful friendships where they are with each other through thick and thin. I have numerous memories of good times with friends but somehow I feel that beauty, dependability has been missing. To quote another example, somebody was recently relating his post-graduation times to me. He said “I made much stronger friendships during my graduation days than I could during post graduation. I did not like people around me during the post graduation. They were so ‘practical’”. And the word struck me. Yes, most of my friendships have been practical not emotional. And over the last few years things have worsened.  

Not Me: Why?

Me: I have drifted apart from many good friends. With some, the friendship has been lost for good.

Not Me: Continue.

Me: What to say! Misunderstandings aplenty. Friend-making ability is inversely proportional to the age. How easy it was to make friends when we are kids - you would talk to the person you were made to sit next to in a class. Similarly during college time, you made friends over a shared samosa. But it is so difficult to stay a child as you grow up. I doubt if I have made a close friend in last so many years.

Not Me: Yeah! With age grows our ego, our mind. We start to think, and overthink. We attach meaning to everything said and done. We are not willing to accept things and people on face value. How does one cope with lost friends?

Me: Move on. What else. That is what is the best about this life, this heart and this mind. It will always find a reason to move on. It has to, because there is no other option.

Not Me: So you just forget friends one fine day? How heartless!

Me: No. Of course you go through the painful transition, the pain which becomes severe when you do not understand what you did wrong. Or when you tried so hard to save the friendship.

Not Me: and when your efforts fail, do you just let go?

Me: you try and try and try and then you let go. You know after a point you just forget what went wrong in the first place. Because forgetting is a part of the process of moving on. So many layers of misunderstanding, miscommunication, perceptions, biases, irritations get added that you forget the kernel of the issue.

Not Me: But you said that there was a superficiality about the friendship. Then why so much fuss? Why could you not let go easily?

Me: I still say there was a superficiality. There was no dependability. It had always irked me that this is only a friendship of happiness. In trouble every one is on his own. I wanted to change that but it never happened.

Not Me: so now what?

Me: A silence. A numbness. Friends make you realise a part of you which you never knew existed. And when they go, the part goes with them, and you just feel stupid about the realisation. Eventually, we all get busy in the life, with responsibilities which we cannot throw away, playing roles which are our wont.  

Not Me: how disappointing! The more I think the more I realise you never understood friendship.

Me: I would say I never got the balance. At times I was too close to the book. And at times I was too distant.

Fund View

Franklin India Income Opportunities Fund (FIIOF) is a debt fund in the nature of Credit Opportunities Fund. Such funds mainly invest in long term corporate debt with returns depending on the prevailing interest rates in the economy. Such funds do not invest in Government securities which give a risk-free return, instead investing in corporate debt which can give higher returns. The return is dependent on the risk taken which is reflected (to some extent) by the credit rating of the instruments invested in. Usually lower rated instruments would give higher returns for the fund, but they carry higher risk - of default. Given the limited upside that debt instruments and by extension debt funds offer, there is limited tolerance for even a single default. Thus such funds have to balance between returns higher than peers and avoiding default risk. This they do by investing in instruments below AAA (highest credit rating). The ratings are those assigned by external credit rating agencies (ICRA, Crisil, India Ratings, Care, Brickworks). Nevertheless the fund house does its own research and analysis of the credit strength of the instrument it invests in. Again, returns of such funds will be range bound (+/- 2% of the median) but default downside cannot be accurately captured because it depends a lot on the understanding of the credit risk of the instrument, which is an inexact science, more so in India. There have been instances of highly rated companies defaulting in the past few years.

Coming to FIIOF, I picked this because I was astonished by the portfolio. The fund has a long history (launched in December 2009) and is rated highly amongst the peers on a research site, which reflects the returns generated over a particular time period. Further the Assets Under Management (AUM) of the company are healthy at ~Rs. 3000 crore.

For Direct Plan	Annualised Return (%)
1 year	11.5
2 year	9.9
3 year	10.5

The problem though is the portfolio which I have analysed in 7 graphs -

Graph 1 - Split of Portfolio

First up, we look at the portfolio split in terms of ratings which are SO (Structured Obligation) and those which are not. SO is a common parlance in rating industry and means rating which derives comfort or support from some structural feature of the instrument that is rated. This structural feature gives an uplift to the standalone rating of the issuer. Now what constitutes a structural feature which strengthens a rating is an interpretation which varies from one rating agency to another. For instance, an explicit and strongly worded guarantee to service the debt being rated can be a strong structural feature.

But SO ratings may also be a way for a rating agency to take refuge behind structural features, all of which are not materially and practically strong, to assign a higher rating than what an issuer deserves on its individual merit. Looked in another manner, companies may try to add structural features (genuine or dubious) to a debt instrument to get an uplift to its ‘base’ rating. In conclusion an SO rating may or may not actually carry the strength of the rating symbol assigned. Thus high proportion of SO ratings in the fund portfolio can be a sign of risk, or a case of back-door entry into a fund.

Graph 2: Rating Agency-wise portfolio split (value in Rs. Cr.)

In India there are five rating agencies of some stature (there are more, but small as of now). These rating agencies can be ranked in terms of their rating quality, market acceptance, market share and standards of due diligence, which I would not go into here. For this fund, 50% of the portfolio is rated by Brickworks (BWR), the newest rating agency, and Care Ratings. Also, BWR’s ratings are also almost entirely SO which may point to the eagerness of the rating agency to assign higher ratings and the fund looking at higher ratings so as to meet its investment mandate. Crisil has no SO ratings in this fund and ICRA has only 23% of SO ratings (by value).  

Graph 3: Ratings-wise portfolio split (value in Rs. Cr.)

A rating is an indicator of investment’s relative safety, so higher rating means lesser probability of default and vice versa. As a corollary, higher ratings would fetch lower return to a fund as against a lower rating. A fund has to balance between safety and returns. But as per me, safety should have higher weightage in a debt fund given that the return upside from a lower rated instruments may not justify the downside of a staggering default. Inherently, this also shows lack of market depth and inadequate understanding and pricing of the credit risk. Nevertheless, debt mutual funds do not go too low down the rating scale in search of higher returns. They tend to hover in the AA categories (each rating category has a 3 sub ratings, apart from AAA). As per a media article, at the end of May, credit opportunities funds had allocated 21% of their portfolio to paper rated AAA, 47% to AA category, 25% to A category and below, and the rest to cash or unrated bonds. Coming to FIIOF - 8% of portfolio is in instruments rated AAA, 30% in instruments rated in AA category, and a high 58% in instruments in the A category. In conclusion, the inherent riskiness of the portfolio, as communicated by the ratings is relatively higher.      

Graph 4 & 5: Group-wise exposure of the fund (value)

An interesting study of the portfolio is the exposure into entities of various business groups in the country. Surprisingly, the fund is invested heavily in instruments of entities belonging to a few groups and thus carries high concentration risk. Keeping aside investments into Banking & Financial sector (23% by value), which is relatively safer compared to corporate entities, and to non-Group or standalone exposures (21%), the remaining 54% of the portfolio is invested in just 6 groups (caveat: Jindal Group refers to entities in the OP Jindal Group, although they operate as separate groups). And some of these groups are not in the best of financial health, details of which I would not go into here. Just to drive home the point of strength of the group and tendency to piggyback the relative weak credit on SO (as explained earlier), the Group-wise SO exposure in FIIOF is presented below.

Graph 6: Basis of SO ratings (value % of total SO rated value)

 

Continuing with my concern with SO ratings, I have drilled down the factors on the basis of which SO rating was given in case of FIIOF. As mentioned, SO rating is derived from some structural feature which can have many forms. And it is a rating agency’s interpretation as to which feature is strong enough for it to be a ‘credit enhancement’ from its standalone basis. This interpretational aspect allows for weaker features to be used to append SO. Assessing strength and weakness of a structural feature is a credit rating skill which I would not go into. Yet, for FIIOF, many SO ratings are based on relatively weaker structural features.

Graph 7: Risk assessment - personal view  

I close this blog with my assessment of what I think are riskier investments of this portfolio. Degree of risk is a relative assessment and based on context. What constitutes ‘high’ risk in mutual fund industry may not be so within the rating industry definitions. Or what is risky to one fund manager may not be so for another. This difference of opinion is what drives any market - more so the investment markets. So this analysis of ‘high risk’ securities is entirely personal, and derives partly from Group Exposures and the ratings.