Hi,
i came to know that Mutual fund fund manager hold some cash in hand to handle redemption and to pick any surprise stocks(beaten too heavily for small bad news).
Obviously the cash held in hand will effect overall performance of MF.
I want to know up to what extent a fund manager can have idle cash in hand and who is having more cash in hand?(so that i can decide weather he is a conservative or aggressive fund manager and park funds)
@Quantum_AMC @rupeshmandal @Bhuvan
Usually the ballpark range for most schemes is 5-10% to meet redemptions. But some schemes keep higher cash levels too - can go as higher too. There’s no limit as such, some schemes have gone as far as 15-20%, if I am not wrong.
But this is a very complicated debate. Do you want your manager to take cash calls or full invested at all times? Do you want the cash allocation to be done at the asset allocation level? Plus higher cash levels can also lead to cash drag. Assuming that the market is falling - higher cash levels will ensure the fund doesn’t fall too much. But if the markets are going up on the other hand - higher cash levels will be a drag on the performance.
So you need to be aware of the trade-offs. You can check the cash levels of a fund in the scheme factsheet/monthly portfolio disclosures.