Junaid Kasbati holds the position of Head of Treasury at Habib Asset Management Limited. He has over six years of experience in fixed income and money market investments. He is currently managing First Habib Stock Fund (FHSF), first Habib Income Fund (FHIF) and First Habib Cash Fund (FHCF).
According to the investment objective of the fund, the strategy seems to be all muddled up as it promises to post competitive returns while keeping the duration short. It is not possible as there is always a trade-off between the both (the duration and returns). However, the fund is heavily invested in Treasury Bills with medium duration which shows that the fund is betting that the discount rates won’t be slashed in the medium term; however a rise in the future is expected of the discount rates.
FHCF has posted below average returns nonetheless fund has low volatility in returns which ensures sturdiness of returns. With that the fund has managed to pay-out a dividend of Rs3.50 for the five months it has been in operation.
The fund was launched with asset under management of Rs397 million which grew by approximately 60 per cent to Rs636 million in a short period since its inception. Moreover, the fund size has not seen a major reduction at year end which means the accumulated funds are sticky. Management fee of the fund is low as compared to category average, at 1.00 per cent per annum. Fund’s total expense ratio has been 0.63 per cent for the month of inception (Mar-11).
Looking at the fund’s historical composition pattern, on average it tends to keep around 98 per cent in T-Bills, while rest is held in cash while the portfolio’s duration hovers around 54 days. Medium term duration expresses that the fund’s inclination is more towards investing in longer duration T-Bills, which explain the passive strategy of the fund towards its cash fund. The fund manager foresees that the interest rates will remain the same or most likely increase even after the surprise slash in discount rateas they were not justified with inflation around 15 per cent, which is possibly to further rise on the back of rising international oil prices. Currently the fund is invested 99 per cent in T-Bills while the rest placed in cash with duration of portfolio around 69 days.
First Habib Cash Fund has shown a slow growth in the fund size, and plus there is not unstable asset acquired till now that which further shows that fund is not eyeing an natural growth in funds. The fund is providing stable returns with low volatility in returns and is able to grow at a steady rate; though the cost of running the fund will be higher in the first few years, but the fund has the potential to grow and adding to that, the management tends to keep the cost at its minimum, which tends to favour the investors.