Portfolio Manager
Kashif Rafi is currently managing the MCB Cash Management Optimizer Fund (MCB-CMOP) since June 2010, after taking it over from Muhammad Imran.He is currently responsible for two funds MCB Dynamic Cash Fund (MCB-DCF) andMetroBank Pakistan Sovereign Fund (MPSF).
Strategy
The fund manager has a passive strategy towards MCB-CMOP, which can be judged from the high duration of the fund, and low returns. However, the fund is highly liquid being a money market fund and it has also been very active in gathering assets under management standing at Rs10.8 billion as of Jul 2011.
Opinion
MCB-CMOP has achieved average returns but it has a satisfying factor that it has a low volatility return-wise which ensures steady returns.
Also, the fund has managed to deliver stable returns over the period of twenty months while being very liquid. However, the fund has yet to capitalise on the large fund size that is has accumulated so far.
Management fee on average of this category is 1.5 per cent but MCB-CMOP charges 10 per cent of gross earnings. The fund’s total expense ratio has been 1.32 per cent for the period 9MFY11 which will meet the category average by June 2011. Though, it is a bit higher when compared within its category which has more than Rs10 billion under their belt. MCB-DCF posted an average return of 11.20 per cent for the period of FY10-11, with an expected expense ratio of more than 1.5 per cent.
The fund grew by 29 per cent in the last financial year and as at June 2011, MCB-DCF is approximately 36 per cent of the total asset under management of Arif Habib Investment Management (MCBAMC and AHIL have merged) as at May 2011. Although the volatility of the fund size is very low, but after a closer look at the historical trend there are a few instances from where one can see that the size of assets have registered a substantial decrease and increase in asset under management ranging between Rs2-3 billion, which tells that the investor concentration risk exists in MCB-CMOP.Looking at the fund’s historical composition pattern, on average it tends to keep more than 70 per cent in T-Bills, around 17 per cent in term deposits with commercial banks and close to nine per cent is held in cash while the portfolio’s duration hovers around 61 days. Very high historical average of duration, tells that the fund’s inclination is more towards investing in longer duration T-Bills and also that the fund manager foresees that interest rates will rise.Currently the fund is invested 91.5 per cent in T-Bills while rest is placed with Banks and DFIs with duration of portfolio around 88 days. The fund has gathered quite a large amount in less than two years, and has registered a stable return. Going forward, with the growing size of the fund the total expense ratio will drop which in turn will boost up the returns further benefiting the investor. Hence the fund has an upside potential in the future, as the size does matter when it comes to money market funds.
