HBL Money Market Fund

Mr Muhammad Aamir Khan boasts a diversified experience of over 12 years in treasury, investments and finance prior to joining HBL Asset Management Limited. Currently he holds the position of fund manager for three funds, namely HBL – Money Market Fund (HBL-MMF), HBL – Income Fund (HBL-IF) and HBL Multi Asset Fund (HBL – MAF). He is also on the investment committee of all the four funds being managed at HBL Asset Management Limited.
HBL-MMF is an actively managed fund; however, not all avenues have been explored as yet. The manager’s reports clearly show that money gathered by the fund so far invariably gets invested heavily in treasury bills. However, if a discount rate hike is expected, the investment is parked in DFI’s and Commercial Banks for short periods.
Since inception, the fund has been unsuccessful in posting returns that would match its category average. However, volatility in returns perfectly matches peer average, even though in money market funds volatility can be ignored as results across the board match each other. HBL–MMF posted 11.28 per cent for FY11, versus 11.43 per cent of peer average.
HBL-MMF started with Rs727m assets under management and after 12 months it has accumulated Rs4.1b as at Jun11. The fund size shows robust growth. The key months for studying fund size are CY-end and FY-end, as commercial banks and corporations need cash to dress up financial statements. The fund size did show a decrease of around Rs300m on CY-end; however the fund size has touched Rs5.9b as of Jul-11, which is a good indication for retail investors as concentration risk decreases when fund size increases.
The management fee for HBL–MMF is 1.00 per cent, and as of Mar-11, total expense ratio (TER) was 0.82 per cent. However, it is expected that the TER will approximately grow to 1.20 per cent per annum, which is below the peer average.
HBL–MMF is invested in 86 per cent T-Bills, and 14 per cent with commercial banks as of Jun-11, whereas if we look up at the historical pattern of the fund, it has always placed its investments in treasury bills and only pulled out if discount hike is expected.
HBL asset management limited has successfully gathered assets under management to get into the big league of the AMC industry. However, when it comes to HBL– MMF, the fund’s operating cost is low, but unfortunately returns are low as well. The purpose of money market funds is providing liquidity and returns, which is not available for retail investors as banks cannot offer both together. However, due to the recent liquidity crisis, banks have once again started providing good rates on one-month term deposit periods, so the only beef with the fund is basically the return.
Recommendation: SELL