This it has done by discarding its cautious approach and taking higher interest rate risk.
Earlier, the fund used to play safe by keeping the average portfolio maturity below 80 days. However, this strategy often led to underperformance. Things changed in late 2003 when the fund decided to take a little more risk and pushed its average maturity higher. Since then, it has remained in the band of 130 to 160 days (and as high as 310 days in December last year).
The fund maintains a high quality portfolio. Below AA papers have rarely touched a double digit figure. Interestingly, in February 2004, the fund had 16 per cent exposure to gilts-rare among cash funds. At present, P1+ papers dominate the portfolio with nearly two third of the corpus parked in them. AA papers and cash and bank deposits account for around 22 per cent of the portfolio.
On the expense side, the fund has staged a strong comeback. From a high of 0.93 per cent in 2003, the expense ratio has dipped to 0.48 per cent, way below the category average of 0.63 per cent. Investors looking for a high-quality consistent player with very reasonable cost would like this offering.
This article was originally published on July 26, 2005.
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