Betting on cash

FUND PICK: Prudential ICICI Liquid

Prudential ICICI Liquid was launched in June 1998. Like all cash funds, it does not charge any entry or exit load. The minimum investment is Rs 15,000, while subsequent investments could be done in multiples of Rs 5,000.

The scheme aims to provide reasonable returns, commensurate with low risk while providing a high level of liquidity, through investments made primarily in money market and debt securities.

The fund carries a good portion of cash and its equivalents. Investors can choose between growth and dividend reinvestment options.

But the cash fund with the largest assets under management (AUM) to its credit is struggling to maintain its returns above the category average. The fund managed Rs 6,169.70 crore as on May 31, 2005. Between 2000 and 2003, it changed fund managers frequently.

Though the fund has managed to beat the category average by a few basis points between 2000 and 2004, its rank vis-à-vis peers has steadily declined.

In 2004 the fund was ranked 22 among 37 funds. It missed the category average by 0.02 per cent. However, it received three-star ratings for the past two years.

The average maturity of its holdings has been increasing in the past six months. It maintains the cash components in a higher proportion. As on May 31, 2005, it had close to 40 per cent in cash and its equivalents, of which over 27 per cent was in bank deposits.
 

Top holdings
As on May 31, 2005	Value (Cr)	Net Assets (%)
HDFC Bank	443.49	7.19
J&K Bank	252.54	4.09
HDFC	230.57	3.74
Reliance Energy	215.15	3.49
Tata Motors	212.98	3.45
Rabo India Finance	200.65	3.25
Allahabad Bank	200.00	3.24
National Housing Bank	194.10	3.15
ICICI Bank	189.00	3.06
Kotak Mahindra Bank	169.31	2.74
Citibank N A.	161.40	2.62
ING Vysya Bank	144.24	2.34
Export-Import Bank	143.05	2.32
HDFC	130.17	2.11
Ashok Leyland Fin.	126.19	2.05
Central Bank of India	125.00	2.03
Canara Bank	125.00	2.03
Treasury Bills 364-D 06/01/2006	108.06	1.75
Indusind Bank	103.85	1.68
Punjab National Bank	100.00	1.62

 

The fund would do much better if it limits its expenses. Many of the top-rated funds in the category have limited their expenses in the range of 0.4-0.5 per cent while the fund's expenses stand close to 0.88 per cent.

-Value Research

Returns in % as on June 30, 2005

Monthly income plans held sway among debt fund categories as far as returns for the past 12 months are concerned. 
 

Average category returns
Debt funds (%)	1 month	1 year
MIPs	3.14	9.64
Short-term	0.5	5.07
Floating rate funds	0.45	5.05
Liquid funds	0.42	4.75
Medium-term	0.64	3.92
Gilt - short-term	0.4	3.63
Gilt - medium & long-term	0.77	2.54
Income	0.6	2.51
Source: www.mutualfundsindia.com

Short-term and floating-rate funds were the next best with 5.07 per cent and 5.05 per cent respectively. 

Leaders
Liquid funds	1 month	1 year
HDFC Cash Mgmt- Sav. Plus	0.48	5.17
LIC MF Liquid Fund	0.47	5.15
Sahara Liquid Fund	0.45	5.09
UTI Liquid Fund - Cash Plan	0.46	5.04
Canliquid	0.46	5.03
HDFC Cash Mgmt  - Sav. Plan	0.45	5.02
Chola Liquid Fund - Reg	0.46	5.01
UTI Liquid Advantage Fund	0.47	5.01
DSP ML Liquidity Fund	0.45	5.00
UTI Money Market	0.44	4.98

Income funds continued to lag behind its peers at 2.51 per cent. Among liquid funds, HDFC Cash Management Fund was the topper with one-year returns of 5.17 per cent, followed by LIC MF Liquid Fund at 5.15 per cent.
 

Laggards
Liquid funds	1 month	1 year
Prudential ICICI Sweep Plan	0.37	3.83
Templeton India Liquid Plus	0.35	4.03
HDFC Cash Mgmt - Call Plan	0.38	4.33
Liquid BeES	0.50	4.44
Reliance Liquid - Cash Plan	0.38	4.45
Kotak Liquid - Regular	0.41	4.55
JM High Liquidity	0.41	4.57
Tata Liquid Fund - RIP	0.44	4.71
Grindlays Cash Fund	0.43	4.73
BOB Liquid Fund	0.44	4.76

Prudential ICICI Sweep Fund and Templeton India Liquid Plan came last in the category.