Volatility: Most growth funds heavy on cash
Most funds are sitting on cash anywhere between 10-15% of AUM, as the market continues to move in a narrow range.
By Madhu T, TNN |
Mumbai: Diversified equity schemes seem to prefer cash over equity. According to ICRA online data, some schemes have close to 60% of their total assets under management (AUM) in cash.
Industry experts say that most funds are sitting on cash anywhere between 10-15% of AUM, as the market continues to move in a narrow range. ���Our analysis shows that the cash portion of the portfolio has been growing steadily in the last few months,������ says a mutual fund analyst.
Why are funds sitting on cash, when they can buy shares cheaply and maximize returns for their investors? ���A fund could be sitting on high cash levels for a variety of reasons, including waiting for the correct entry point to negative or range-bound market view. In case of NFOs, the fund may also be in the deployment mode,������ explains Sameer Kamdar, ceo, Asset Management, ASK Investment Holdings.
���People don���t think the market will move up sharply soon. In such a situation, they prefer to stay on cash,������ says Waquar Naquvi, ceo, Taurus Mutual Fund. ���Most fund houses are sitting on cash up to 15-30%.������
Another reason why schemes may prefer to sit on cash is because of the nature of their investment. ���When you are running a small or a mid-cap scheme or a scheme looking for new opportunities, you will have to keep some cash aside. In a market like this, the cash could come in very handy,������ says an MF manager.
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