Fund Call. Birla Sun Life Cash Plus: A secure avenue for surplus funds

Birla Sun Life Cash Plus is a good alternative to park your surplus rather than letting it idle in a bank savings account at 4-6 per cent.

In the last one year, the fund has delivered a return of 8.1 per cent against category average returns of 7.8 per cent. It has also managed to deliver above-average returns over three- and five-year periods.

The fund however, underperformed its benchmark Crisil Liquid Fund Index a tad bit during the June 2013-14 period — 9.2 per cent return against the benchmark’s 9.7 per cent return. But the fund has caught up over the last two years and beaten its benchmark.

For investors with very short investment horizon of six months to less than a year, liquid funds offer better returns than savings deposits. These funds also score better on liquidity as they have no lock-in period and do not carry entry or exit loads. In case of FDs, there is a penalty for premature withdrawal.

Liquid funds primarily invest in money market instruments, such as certificates of deposit (CD), treasury bills, commercial papers (CP) and term deposits, with maturity up to 91 days. Birla Sun Life Cash Plus as of July 31, 2016, has invested about 67 per cent of its portfolio into CPs and CDs, 21 per cent in T-bills and 12 per cent in term deposits.

The fund, however, charges a slightly higher annual expense ratio of 36 basis points as against an average of of 22 basis points by other liquid funds. For liquid funds – where large redemptions sometimes happen at short notice – having large assets under management – is important. And that’s where the fund scores with its assets at Rs 31,846 crore.

Remember though that the central bank’s initiative to ease liquidity at the shorter-end, have already pulled down yields on short term debt instruments.

For instance, yields on 3-month and 6-month CPs have fallen by about 80 basis points in the past year. Hence returns going ahead, may fall short of last year’s performance.

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