Since its launch, IGI Money Market Fund has been managed by Mr Syed Saifullah Kazmi. Currently, he holds the position of fund manager for three funds, namely IGI – Money Market Fund (IGI-MMF), IGI – Income Fund (IGI-IF) and IGI Stock Fund (IGI – SF).
The fund would be classified as a passive fund, reason being nominal returns and fund manager’s limited forecasting abilities.
Since inception, the fund has not been able to attract enough investors, as it has not been posting attractive returns compared to category leaders, but IGI-MMF has been able to make the category fund lower their management fee. As of right now, officially IGI-MMF is one of the cheapest funds among its category. However, the bringing a low cost fund on the table did not help the company accumulated much fund size. The fund grew from Rs0.69m to Rs2.70b since inception, whereas money market funds that were launched in the same year have crossed mark of Rs10b, in addition to charging management fee of higher than 0.8 per cent per annum.
IGI-MMF posted an 11.58 per cent return in FY11, with lower volatility of returns, while on the other hand its total expense ratio exceeded the management fee and stands at 1.11 per cent as of Jun11. This means an investor of IGI-MMF would get a net 10.47 per cent for FY11.
The fund manager has invested heavily in treasury bills, except for a few instances, and has not been fully utilising avenues available for money market funds that others are using to benefit their investors.
Since inception, IGI– MMF, has kept the following averages in T-Bills 67 per cent, Cash 17 per cent, Money Market Placements 16 per cent and TDR 15 per cent. Currently, portfolio stands with 78 per cent T-Bills, seven per cent cash, eight per cent Money Market Placements and seven per cent in others. Historic averages are not correlating to current averages assets and were allocated in a haphazard manner during the interest rate hike.
The fund faces high investor concentration risk, which means quite a few investors with large amounts have invested in the fund. Currently, money market funds across the board are losing their high yielding attractiveness as compared to banks’ term deposits. As banks are facing liquidity shortage with the eid coming up, they have increased rates on one month term deposits, hence investing right now in a money market fund would not be recommended.
Recommendation: SELL