Ayaz Mustafa Zuberi and Mansoor Bughio are the fund managers in charge of fixed income at Faysal Asset Management Limited (FAML). Both carry more than 10 years of experience in the financial market. They are currently in the investment committee of the following: Faysal Balanced Growth Fund (FBGF), Faysal Income and Growth Fund (FIGF), Faysal Savings Growth Fund (FSGF), Faysal Asset Allocation Fund (FAAF), Faysal Islamic Savings and Growth Fund (FISGF), and Faysal Money Market Fund (FMMF).
The monthly fund manager reports claim that the fund will provide everything to an investor, stability, capital preservation, liquidity and competitive returns. It is the first fund out of all the money market funds whose strategy is ambivalent, there are no steady patterns seen from the data collected other than that they are sitting on a pile of cash since December 2010 (the inception date of the fund).
FMMF has posted returns slightly below the category average since inception December 2010. The fund mainly offers liquidity by not actively investing in money market instruments, though it provides investors with low volatility in returns which ensures steady returns. The fund has paid a dividend of Rs5.75 (5.75 per cent) which is good from investor perspective keeping in mind that the fund is only eight month old.
Stability-wise the fund has performed well in a short span, the returns vary between 11.11 per cent to 12.22 per cent. However, the fund has yet to grow in terms of size as to date the fund has only Rs692 million under its belt.
The fund is charging 10 per cent of Gross Earning or minimum 1.25 per cent of Net Assets, which is higher than the category average. Total expense ratio, charged till March 2011 stands at 1.02 per cent, which meets the peer average, however idly the total expense ratio should be approximately around 1.00 per cent for money market funds.
The fund grew by Rs313 million in eight months to Rs692 million, which is a growth of 121 per cent, but when compared with peer funds the three digit growth loses the touch as the industry has witnessed larger growth in money market funds. The volatility of the fund size is astonishingly the lowest to date, which means that the fund has been unable to acquire funds from corporates and also that the high net worth clients that have invested are stable investors.
Looking at the fund’s historical composition pattern, on average it tends to keep 63 per cent in cash, around 33 per cent in Treasury Bills, while the portfolio’s duration hovers around 45 days. The historical averages of the fund tells that the fund is getting a good rate for keeping money in the form of bank balance than investing in Treasury Bills, as it has been posting slightly below its peer average. Currently, the fund is invested 55 per cent in T-Bills while 23 per cent in cash and rest 22 per cent is placed with Banks and DFIs with duration of portfolio around 82days. FMMF’s fund size growth rate is not one to surprise. Secondly, a money market fund usually does take time to start investing in treasury bills, but in the case of FMMF it was very unusual that more than half of the fund size was kept in the form of cash and cash equivalent. Though the fund is providing liquidity and stability, but it all boils down to returns, which are lower than an average money market funds return.