Outperformer across key parameters

The HDFC Cash Management Fund - Treasury Advantage Plan is being managed by Anil Bamboli since September 2007, and has assets, under management, of Rs 16,776 crore as of May 2011. The fund has been ranked CRISIL mutual fund rank one (top 10 percentile) in the ultra-short term funds category for the past eight quarters, showing superior performance along with good portfolio management. Liquid and ultra short-term funds seek capital preservation coupled with low risk. These funds are attractive during a rising interest rate regime due to their investments in low-duration investments. Portfolio maturity is directly correlated to interest rate sensitivity. Ultra-short term funds have a portfolio maturity above liquid funds (91 days) and extend up to about one year.

While returns are important in choosing an ultra-short term fund, investors should also look at portfolio-based parameters, as the returns differential between funds in the category is low (two per cent measured over one year). Hence, in the CRISIL mutual fund ranking criteria, a weightage of close to 50 per cent is allocated to portfolio-based attributes.

The fund has outperformed both its peers and the benchmark (CRISIL liquid fund index) across longer time frames, i.e., one, two and five years. CRISIL’s analysis, however, reveals the fund’s probability of returns below the risk-free rate (downside risk probability or DRP) has been low in relation to category peers over the past year.

The fund has maintained high credit quality in its portfolio. Over the past year, P1+/AAA and equivalent, treasury bills and net receivables account for 99 per cent of the fund’s portfolio.

On the average maturity front, the fund has maintained a lower average maturity as compared to its peers over the past year, indicating low interest rate risk in the portfolio. Liquidity is also in assessing ultra-short term funds. Illiquid securities hinder the fund’s ability to liquidate the portfolio during heavy redemptions. The fund ranks first in its category on the liquidity parameter. Ultra-short term funds can provide a good avenue to retail investors with a short-term investment horizon and an objective of higher returns in relation to liquid funds and savings fund deposits. However, the retail investors should look at both returns and portfolio parameters while selecting ultra-short term funds.

—Crisil Fund Services