JM High Liquidity has a strong preference for safety. In the first three months of 2004, nearly half of the fund's assets were parked in fixed deposits (FDs). According to the fund manger, this has been done to manage the year-end volatility. Currently, FDs account for 40 per cent of the total assets. However, throughout its tenure so far, FDs have accounted for an average 25 per cent allocation, which is relatively high compared to peers.
The fund's safe play is also reflected in its low portfolio maturity profile -- average 80 days. That apart, it has also taken lower credit risk by largely sticking to short-term P1+ rated securities and AAA-rated bonds. However, for a short period – first half of 2000 – it invested 20 per cent into mid-quality bonds, but since then the exposure to lower rated bonds has come down to under 5 per cent now.
One of the fund's biggest advantages is its low minimum initial investment -- Rs 1,000, which means that it's also suitable for the retail investors. The only catch here is its above average expense ratio of 0.81 per cent compared to the category average of 0.7 per cent, but that has to be subsided for its larger retail focus. All told, JM High Liquidity may never lead the pack, but its cautious approach makes it a compelling short-term investment option.