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Alliance Cash Manager

Armed with a quality focus, Alliance Cash Manager has delivered what it set out to deliver -- superior returns than short-term bank rates

With AAA rating backing the fund, Alliance Cash Manager (ACM) has a sharp focus on credit quality. The fund tops it with a conservative stance on interest rates to emerge a safer bet. A no load fund, ACM facilitates redemption within 24 hours.

ACM invests only in AAA corporate bonds and P1+ rated securities. Being on top of the credit ladder, these instruments provide strong protection against defaults. While this eliminates both credit and liquidity risk, the fund has also been very conservative on the interest rate front. The investment charter permits a weighted average maturity of 1.5 years but the fund has maintained an average maturity in the 1 to 2 month frame.

Instead the fund chooses to park in the right instruments within this lower maturity spectrum which help in capturing the gains of the rally. Its recent investment in corporate debenture is a case in point. However, the fund limits exposure to T-bills, which are most susceptible to interest rate changes among short-term instruments. Instead, it earns a regular coupon income from a basket of call money, corporate debentures and commercial papers. Though, the strategy has yielded the fund returns below that of JP Morgan Treasury Bill Index, its performance is only in line with its focus for lower risk with a quality focus.

While Alliance Cash Manager is not on top of the performance ladder, but it is a good short-term cash-parking vehicle for its quality orientation. The fund has done well with what its sets out deliver -- superior returns than short-term bank rates.