Going high on cash helps Axis Mutual Fund schemes to outperform peers

Going high on cash helps Axis Mutual Fund schemes to outperform peers

Axis Mutual Fund schemes to outperform peers

Axis Mutual Fund offers a different type of schemes to invest. In mutual fund schemes, Equity funds have better returns compared to other types of funds such as debt, Index, hybrid, and fund of funds. In India, equity fund managers are criticized for holding high cash levels. Now, the strategy has applied to Axis Mutual Funds. In August, Axis mutual fund schemes raised the highest cash level. The bluechip fund, multi-cap, and mid-cap funds raised its cash level to 20 percent which is the highest in this fiscal. It helps schemes to outperform peers in challenging market conditions.

A senior fund manager at Axis Mutual Fund stated that they are moving them over a period at the current level of the stock price. Analyzing valuations and growth, the risk-reward needs to be estimated more objectively.

Another person from Axis MF said that in recent months, schemes of cash levels have gone up. It happens due to strong inflows. Generally, equity funds hold below 5 to 7 percent of the corpus in cash.

Axis Bluechip Fund – Growth

Net Asset Value as on 18 Sep 2019  Annualized Returns for 3 years  Suggested investments horizon  Time taken to double money
 Rs 28.8500 +0.11(+0.38%) 11.82% > 3 Years  4.10 Years

Axis Midcap Fund – Growth

Net Asset Value as on 18 Sep 2019  Annualized Returns for 3 years  Suggested investment horizon  Time taken to double money
 Rs 35.5200 +0.24(+0.68%)  10.25%  >3 Years  2.3 Years

Vishal Dhawan, the chief financial planner says investors are enabled to allocate cash to their portfolio level or through asset allocation schemes. But, some fund managers prefer to raise cash holdings to protect their securities from the stock market fall when the stock-picking becomes difficult. For the Axis, the decisions have helped it emerge as the top performer.

According to the reports, the Axis Bluechip Fund has returned 5 percent of assets of Rs 7,005 crore, which collects better returns compared to its benchmark S&P BSE Sensex 50 TRI has -3.21 percent of returns. Another scheme of Axis MF is Axis Mid-cap Fund. This scheme returns fallen to 2.19 percent of assets of Rs 2,819 crore while its benchmark S&P BSE Mid-cap TRI has fallen 15.74%. Axis Multi-cap Fund gained 4.8 percent while its benchmark S&P BSE 500 TRI has fallen 6.81 percent.

The changes in Axis mutual fund schemes and its benchmarks happened over the last one year. At the same time, the S&P BSE Sensex and S&P BSE Mid-cap Index have lost 4.19 percent and 18 percent respectively.

The holding of a higher cash level strategy would misfire if the markets rebound sharply. As of the reports, some large-cap equity schemes held cash worth up to 25 percent of the corpus. These schemes are caught on the back-foot in 2009 after the market bounced back.

Going high on cash helps Axis Mutual Fund schemes to outperform peers

A certified stock expert said that Cash is a double-edged sword. In a growing market, it works as an obstacle while in a falling market it helps protect the downside.

Devalkar said that their higher cash level strategy has been to remain invested as illustrated by their average cash allocation of under 5 percent in the fund historically.

The top three funds of Axis Mutual Fund schemes such as Axis Bluechip, Mid-cap, and Multi-cap fund have 20%, 19.3%, and 20.13 percent cash respectively, as of 31st August. These three fund schemes also considered as top funds in large-cap, mid-cap and multi-cap funds.

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