Why are several Axis Mutual Fund equity plans based on 10-25% cash?

Investors always notice when mutual fund companies have a lot of money. Investors infer that fund houses are sitting on cash because they think the market is overvalued or they expect a correction. It is no wonder that many mutual fund investors have tried to find out the reasons why some Axis Mutual Fund stock plans are sitting on a huge pile of cash. Several Axis Mutual Fund equity plans have around 10-25% cash in their portfolios.

Axis Multicap Fund has 25% cash in its portfolio, followed by Axis Small Cap Fund with 18.05% cash, Axis Growth Opportunities Fund with 14.27% and Axis Midcap Fund with 11.55% cash.

Axis Multicap Fund, which was launched in December 2021 and manages a whopping Rs 5,336 crore, might be an exception. Mutual fund analysts say fund managers may not have found attractive opportunities to deploy cash.

“Axis Multi Cap Fund is a new program and therefore the fund is still deploying cash. That said, some Axis funds tend to hold higher cash than their counterparts in volatile markets. Additionally, Axis funds have received strong inflows over the past few years,” says Kaustubh Belapurkar, Principal – Research Director, Morningstar India.

Fund managers accept these cash calls during times of market uncertainty and volatility. Cash in the portfolio increases liquidity. Holding cash in a portfolio can reduce returns when markets rise, but cash can also limit losses during market declines. AMFI data suggests that Axis Mutual Fund manages a total of Rs 259,818.42 crore as of March 2022. Axis schemes have seen large inflows over the past three years. The trend still continues.

Fund managers at Axis Mutual Fund say they are watching the market closely and are waiting for quarterly results to take calls. “We haven’t actively deployed, although the flow of the SIP continues to accumulate in the fund. As we see good opportunities, we will increase the fund’s exposure. As corporate results continue to come in, our view will become clearer on market opportunities and we will deploy excess liquidity,” said Jinesh Gopani, Head of Equities, Axis Mutual Fund.

Some financial planners believe that while cash calls can be tricky, at this point it seems like a good move. “Holding cash is a double-edged sword. However, I think in today’s environment, 15% cash back like this may be a prudent move. Since January, market volatility has been very high. The war situation in Ukraine, inflation, rate hikes and now the chances of another wave of Covid, all these factors have a positive impact on the liquidity in the portfolio”, says Santosh Joseph, founder of Germinate Wealth Solutions, based in Bangaluru.

Finally, mutual fund advisers need not worry about cash holdings because the fund house may soon find attractive opportunities, advisers say.

Dolores W. Simon