The Hindu Business Line : JM Equity & Derivative Fund locks significant portion in FDs

A SIGNIFICANT component of JM Equity & Derivative Fund's corpus is lying locked in fixed deposits with various banks, an allocation that JM Mutual Fund strongly defends when faced with the criticism that actively-managed funds should not park money in FDs.

JM Equity & Derivative Fund, an interval fund that seeks to generate income chiefly through arbitrage opportunities emerging out of mis-pricing between the cash and derivatives markets, has relied on heavy FD exposure with the likes of HDFC Bank, IDBI Bank, Union Bank of India and State Bank of Bikaner & Jaipur.

On last count, FDs accounted for Rs 300 crore or so (in terms of market value as on May 31), which contributed largely to the scheme's total assets of about Rs 980 crore. The latter, incidentally, has grown since then.

Mr Krishnamurthy Vijayan, CEO of JM MF, said the scheme, in order to meet its basic investment objective, is free to invest its surplus in various fixed-income options.

A substantial part of the portfolio is deployed in equities, a move that he felt is rooted in active management strategies.

The scheme, which was flagged off in February with Crisil Liquid Fund Index as its benchmark, has also made allocations to various other debt instruments, including certificate of deposits, floating rate bonds, securitised debt and privately-placed debentures.

As on May 31, it had an average maturity of 0.26 years and a duration of 0.18 years.

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