Earlier called the Zurich India Liquidity Savings Plan, HDFC Cash Mgmt Saving manages its credit risk by mainly investing in AAA/P1+ instruments and avoids interest rate risk by keeping a low average maturity.
However, this does not mean that the fund compromises with returns. From time to time, it takes higher interest rate risk and benefits from it. For example, ahead of the repo rate cut in August 2003, it raised its average maturity from 62 days in June 2003 to 160 days in July 2003, thus making smart gains. Since the past one year, the fund has maintained maturity above 100 days, something unique in the category. However, the fund manager has balanced this by reducing exposure to AA and below papers. The overall portfolio too has undergone a change. The focus has shifted from AAA, cash, bank deposits and money markets instruments to P+ papers.
Finally, the fund has controlled its expenses very well. Currently it charges 0.32 per cent (down from 0.97 per cent in March 2002) as against the category average of 0.62 per cent.
This article was originally published on July 06, 2005.
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