Fund managers are increasingly finding refuge in cash. There are at least 29 schemes in the equity space that have an exposure to cash which is above 30 per cent. Amongst these, UTI Mutual Fund's nine schemes are the prominent ones.
But for investors, the issue is whether or not high cash levels actually help in delivering a superior performance. We looked at the funds that maintained high cash levels in February and compared their return with the category average to find whether the strategy actually worked.
Sahara Banking and Financial Services Fund topped the list with a 74 per cent exposure to cash, despite an asset base of just Rs 2.05 crore. The high allocation paid off and the fund delivered a return of -4.01 per cent against the category average fall of 10.55 per cent.
UTI Wealth Builder Fund Series II and Reliance Diversified Power Sector Fund have cash levels of 63.62 per cent and 44.23 per cent allocation, respectively.
Both these funds fall in the Equity Speciality category and since funds in this category are extremely varied, it is unfair to do a comparison with the category average. Having said that, UTI Wealth Builder Fund Series II curtailed its fall to -0.68 per cent. Launched in November 2008, the fund manager is in the process of investing the money across various asset classes.
On the other hand, Reliance Diversified Power Sector Fund fell by 3.8 per cent. This fund is the largest in terms of assets under management (Rs 3,319 crore), where equity oriented schemes are concerned.
UTI Master Growth topped the equity diversified category with the highest cash level. The fund delivered a return of -2.84 per cent (category average: -4.5%), but there were at least 30 more equity diversified equity schemes that delivered better returns with lower cash allocations. It is only since August 2008 that the fund began increasing its exposure to cash, from 19 per cent to 41 per cent presently. JM Multi Strategy Fund has a high level of cash (39.5%) and a small asset base (Rs 52 crore). But its high exposure to derivatives helped deliver 16.45 per cent (December 2008-February 2009). During the same period, the equity diversified category returned -0.5 per cent.
Ultimately, cash helps but is no guarantee to minimising a fall in a volatile market.
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
