ICICI Prudential Liquid Plan has been around for a decade and is the largest cash fund around. It was initially known for its average performance and frequent fund manager changes. But its fortunes changed last year. Ever since January 2007 the fund's return never fell below its category average and it was a top quartile performer last year.
The fund manager began to take aggressive bets on the interest rate front over the last 15 months. Right from June 2007 to September 2008, the average maturity of the portfolio has been higher than the category average. For instance, in March 2008, it stood at 303 days against the category average of 118 days.
But this fund has displayed the tendency to go against the herd. For example, when the category average maturity increased from 84 to 88 days, the fund's maturity decreased from 110 days to 102 days (January-February 2005). A move that paid off. More recently, this year in April, May and June, when category's average maturity remained fixed at 97 days, the fund's maturity kept fluctuating.
But the fund has not compromised on the quality of the portfolio. The portfolio is stacked with high quality paper, both short- and long-term, with a glimpse of T-Bills. Exposure to unrated paper seldom crosses 4%. Though the fund is heavyweight on the financial sector, there is also an allocation to Energy and Construction. Amongst the varied instruments in the portfolio, including CP and CD, the fund has a substantial exposure of 16.22% to Structured Obligations (September 2008).
On the expense front, the fund has a long way to go with an expense ratio of 1.11% as against the category average of 0.53% (March 2008).