After maintaining a cautious approach for long, Sundaram Money has started taking slightly higher interest-rate risk recently. Since December 2003, the fund's average maturity has been in the high band of 130-160 days compared to its historic average of nearly 80 days. Though this strategy may look optimistic, in combination with higher cash equivalent (nearly 50 per cent exposure) the fund managed to garner top quartile return through 2004 Q1.
Interestingly, in February 2004, the fund held 16 per cent exposure to gilts –rare among cash funds. However the fund manager defended this by saying, "the corporate bond market has become markedly less liquid and has a higher volatility at this stage. Thus, we prefers to hold short gilts in preference to corporate bonds." Corporate bonds, largely AAA-rated, just account for 11 per cent of the portfolio now.
Despite its somewhat aggressive recent posture, Sundaram Money has done its job well in delivering stable returns to the investors. A lot is also owed to the fund's low expense ratio, which is currently pegged at 0.54 per cent (as on March 31, 2004) – 14 basis points less than the category average. Those looking for a high-quality cash fund that has delivered consistent results will find this fund fills the bill.