Mustafa Kamal stepped in Askari Investment Management Limited (AIML) as fund manager in October 2009 for Askari Sovereign Cash Fund (ASCF). Currently, he is also managing Askari High Yield Scheme (AHYS) (formerly Askari Income Fund) and Askari Islamic Income Fund (AIIF).
Fund Manager strikes a perfect balance between market treasury bills (T-Bills) and Bank Deposits (TDR) given the highly volatile interest rate environment. Manager actively follows the changes in market with the help of its research department to capitalise on any market inefficiencies. T-Bill strategy is simple, when interest rates are peaked out and expected to be stable for next two following months, T-Bills portfolio inclines more towards 6- than 3-month.
High volatility of returns is the only thing weighing down this top tier offering. Since the launch of Askari sovereign cash fund in September 2009, manager has achieved above-average returns and also has above-average volatility of returns. Volatility in returns became more visible when interest rates were increased by the State Bank of Pakistan, subsequently pragmatic changes were made to reduce the duration of portfolio, with that the combination of the asset allocation between T-Bills and TDRs was adjusted and aligned with market dynamics to generate high returns.
This fund is the embodiment of active management, when it comes to money market funds. The difference between the returns of the category average and ASCF has remained approximately around 100bps for the FY11 period. Fund Manager’s willingness to change the T-Bills and bank deposit mix, while keeping a strict check on duration, has given the fund a leg up in its category. Currently, 67.3 per cent (Jun11) of the fund’s portfolio is made up of T-Bills compared with a category average of approximately 82 per cent.
The fund’s since inception returns place it in the top funds of money market category and if seen in the FY11 period alone, it was the best fund amongst its category peers return-wise, the fund has performed better than all the money market fund (15 funds in total). The fund manager attributes this performance to its ability to adjust the fund’s duration and actively manage the portfolio. The fund’s duration (a measure of interest-rate risk) is currently above its own historical average standing at 74days, as the market sentiment is of that the interest rates will remain stable the average category duration likewise are higher than normal.
As the difference in yield between three and six-month T-Bills has widened up, ASCF’s manager have added to the fund’s stake in the latter. This is a solid offering for risk averse investors, especially retail investors should prefer investing in money market funds over savings account. With comparison to savings account ASCF has given a return of 12.26 per cent after deducting all the expenses of approximately 1.30 per cent. However, high volatility subdues our overall regard a little bit for the fund, as the investor will require actionable intelligence to take an exit from the fund.