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IN THE past one year, short term debt funds was a rare category of funds that was not only in the black but also, perhaps, gave the mutual fund industry highest returns, on an average.
Peerless Short Term Fund (PSTF) that outshone every thing else in the short term debt fund with its one year return of 12.75 per cent. The next best performer was UTI Short Term Income Fund with a 9.87 per cent return.
PSTF is a relatively new entrant among short term funds with its launch in August 2010 and yet in a period of about 16 months it has managed to outperform other veteran short term funds. Says its fund manager, Ganti Murthy: "A lot of churning of portfolios was required to be undertaken in this fund due to significant inflows and outflows.
We took a lot of positions in the commercial papers market where the rates being offered by three to six month CPs were as high as 11.5-12.5 per cent."
A look at the recent and past holdings of PSTF reveals relatively higher exposure to CPs and a very short term maturity profile of the total portfolio. The high returns it fetched indicated a higher risk was perhaps carried by the fund in its strategy.
As on October 31, the fund's portfolio's modified duration (a measure of interest rate risk where higher the duration, higher the interest rate risk and vice versa) was as low as 0.14 years, and the average maturity of its portfolio was also very low, just 59 days.
This made PSTM perform like an ultra-short term fund but clearly the strategy rly the strategy has paid off.
The fund had a 51.48 per cent exposure to CPs of five CPs of five companies -Indiabulls Housing Finance (15.54 per cent exposure), Karvy Stock Broking (12.95 per cent), Religare Finvest (12.85 per cent), Indiabulls Financial Services (7.81 per cent) and Mannapuram Finance (2.33 per cent). Another 46.42 per cent exposure was in certifi cates of deposits of four banks, with Central Bank of India and Ratnakar Bank accounting for the most.
A year ago, the fund had even shorter duration exposures. At the end of November last year, PSTM's portfolio had a modified duration of 0.07 years with an average maturity of just 26 days. At that time, the fund had a 63 per cent exposure to CPs of eight companies with 10.29 per cent exposure to JK Lakshmi Cement, and a exposure of between 8 per cent and 9 per cent each in Karvy Financial Services, JM Financial Services, Muthoot Fincorp, Manappuram General Finance and Leasing, and Amalgam Bean Coffee Trading Company.
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