JM Liquid is a medium term, no-load debt fund launched in December 1999. The fund has paid dividends
18-Sep-2000 •Research Desk
JM Liquid is a medium term, no-load debt fund launched in December 1999. The fund has paid dividends of 16, 18, 14, 13, and 10.75 for each financial year since 1995-96. In 2000-01 the fund has paid a dividend 1.75 % May. Under the dividend option, the fund has posted an annualised return of 13.29 % since launch on the back of medium quality portfolio. Launched when the interest rates were ruling high, the fund invested in corporate papers, which offered a high coupon income. Leveraging this interest income with active exposure to equity (not disclosed), the fund posted impressive returns of 21 and 18 % in calendar year 1996 and 1997. With interest rates on a decline since 1998, the fund benefited on its high coupon investments. While the fund has no equity investments now, it has sought exposure to lower quality debt instruments - AA and below, to augment returns. These instruments have constituted an average 38 per cent of the portfolio since 1999 though the exposure was down to 20 per cent in August 2000. These lower quality instruments contribute higher dividend income for the higher accompanying risk. Further, since mid 1999, the fund has started taking exposure to government securities, which are high on credit quality. The fund has handled interest rate risk prudently and maintained a defensive strategy with its maturity profile. Not surprisingly, the fund did not lose out in the recent bout of volatility in July. While the fund with its defensive strategy has guarded its assets in recent times, it has failed to leverage its small asset base to emerge in the top quartile.