My query is related to the Taurus Liquid Fund, as this fund has a portfolio of all nationalized Banks CDs, then why is it categorized by experts with a high risk & low return profile. On the other hand, Canara Robeco Liquid Fund has a very risky portfolio like NBFCs papers, etc and yet considered among low risk and high return profile.
- Mahesh Kumar Kaushik
Value Research gives the fund's risk grade on the basis of fund's risk of loss and not on the basis of the instruments held by funds in their portfolio. This refers to absolute losses and even periods when the fund underperforms a risk-free guaranteed investment like bank-term deposit.
To calculate a Fund's risk, weekly fund returns are compared against the weekly risk-free return for debt funds. Risk-free return is defined as State Bank's 45-180 days Term Deposit Rate.
The relative performance of the fund is expressed as a risk score and the risk score of Canara Robeco Liquid Fund is lower than that of Taurus Liquid Fund while the return score of the former is higher than that of the latter. That's why Canara Robeco Liquid Fund has been given a low risk and high return grade whereas Taurus Liquid fund has a high risk and low return grade.
This article was originally published on November 27, 2008.
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