Looking at this month’s mayhem in the market, a newspaper recently asked a few “financial sector mavens” whether it makes sense for investors to keep a chunk of their portfolios in cash. One of them suggested 15% in gold and 5% in cash, while two others suggested anywhere from 20% to 30% in cash.
We did not ask fund managers that question. But we looked at their September portfolio disclosures to see if high cash allocations did save them. The Sensex closed at 13,055.67 on October 1 and then at 9,975.35 on October 17 – a fall of 22.43%. We took 10 equity funds with the highest cash allocation (mentioned in brackets) and saw whether or not it proved to be a buffer during this specified time period.
The funds with the highest cash allocations were from the UTI stable. UTI Long Term Advantage Fund - Series II (46.82%) and UTI Infrastructure Advantage Fund - Series I (37.74%) fell by -13.05% and -16.74% respectively. Series II had the highest cash allocation and it obviously paid off in this market fall.
Sundaram BNP Paribas Equity Multiplier (30.81%) fell the least at just -11.07%. Sundaram BNP Paribas Growth (29.23%) had around the same cash levels but fell harder at -18.72%.
ICICI Prudential Infrastructure (29.04%) fell the most at -23.64%. It underperformed the Sensex and the Nifty. JP Morgan India Equity (32.50%) was another one that fell hard at -22.07%.
Reliance Tax Saver Fund (33.81%) and Reliance Diversified Power Fund (35.89%) fell by 15.19% and 20.12% respectively.
Sahara Wealth Plus Fund Fixed Pricing (30.98%) and DSPML Natural Resources and New Energy (30.15%) had around the same cash levels and fell by 13.55% and 18.04% respectively.