Thanks to the sharp fall in the ICE index, technology mutual funds have taken a preference for cash to information technology scrips. Almost all the top tech funds are maintaining huge cash balances in their portfolios.
A couple of the top nine technology funds have cash positions as high as 60 per cent of their total asset base. And this is not just an aberration. They have been holding chunks of cash persistently for the past several months now.
According to mutual fund experts, holding such huge cash positions is not a good and prudent strategy. "These funds will not be able to take advantage of the upside, when there is any," said Dhirendra Kumar, chief executive of Value Research.
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Moreover, fund management is all about staying invested. Their mandate is to make the best investment choices among the options available. Holding cash is something which an individual anyway does, said a fund manager.
ITI Pioneer, which was one of the first mutual funds to launch an infotech scheme, has about 18 per cent of its total assets in cash form. The percentage of cash to the total assets actually increased from over 15 per cent as on September ended to 18 per cent now.
R Sukumar, fund manager, Pioneer ITI, said: "This is not abnormal. There has been no marked variation in the one-year average of cash levels in our fund."
He said considering the high volatility in the infotech scrips, Pioneer ITI had taken care to keep aside cash to invest when the prices were down. "Some more bad news is expected in the second-line companies," Sukumar said, adding the fund had already exhausted its investment limits on the top-rung software companies.
Experts point out that several funds were holding huge cash balances in their portfolio to time their entry into the ICE scrips at lower price points. However, with the markets having already bottomed out, they would not be able to gain if there is any upward movement in prices, they added.