Syed Khurram Qadri is currently managing KASB Cash fund, along with two other funds, KASB Islamic Income Opportunity Fund and KASB Income Opportunity Fund.
From the historic data of KCF fund, it can easily be seen that the fund was investing sitting on cash only and it slowly start placing funds with commercial banks and DFI’s. Then from Mar ’10 onwards the fund started investing T-Bills and with that it maintained a substantial portion of funds with commercial banks and DFI’s. To conclude the fund did not appear to have a strategy as it was seen jumping from on investing avenue to another till the start of this year, where is started investing in T-Bills and has kept a high duration meaning a passive money market fund.
The fund took a gradual start return-wise and accumulating fund (size-wise). Since inception, we can see from the graph below the fund took a quite a few months to start posting above average returns. However, volatility of returns was no different than its peer group as it can also be seen from the graph that KCF has been mimicking its peer group which is satisfactory.
However, the fund gets a bit risky if compared with its own kind, as there is an adequate liquidity risk arising in the fund as around 30 odd percentage of the fund has been kept with commercial banks and DFIs. It can be a problem for the fund if there is a run on it. Since inception the fund has performed poorly in accumulating funds and if compared with the size from launch to Jun-11, it has only doubled its size from Rs293m to Rs593m.
The management fee for KCF was revised down from 1.250 per cent to 1.00 per cent, but the front end load which is non-existent in the money market circle remains, which is probably the main reason hurting the fund in growing its size. The total expense ratio dropped from 1.28 per cent (Mar-10) to 0.99 per cent (Mar-11), which shows that at least the fund is cutting down its expenses. And from an investors point of view the fund will be charging a lot less than category average management fee.
KCFis invested in 73 per cent T-Bills, 3 per cent Cash and 24 per cent with DFI’s as at Jun-11, with 75days duration. Overall, the fund in FY11 has posted a return of 11.76 per cent (net of management fee & all other expenses).
Money market funds are basically an alternate to saving accounts, and the catch for investing in money market funds is that they pay out return of more than 10 per cent which no saving account is offering on low amounts. Investors should know that industry wide Asset Management Companies are not charging a front end load on their money market funds except KASB Funds (that is, 1.00 per cent front end-load which means they charge you Re1 if you invest Rs100). Hence investing in KASB Cash Fund would not be recommended till they remove the front end load of 1.00 per cent.
