There are 8 PMSes who have zero cash in their portfolios at the end of June; only 1 strategy now holds more than 50% cash compared to 2 in May

The surprising rally in equity markets, after hitting its nadir in March end, is not without reason. Turns out the nimble-footed PMS managers have been deploying loads of capital to take advantage of the situation. 

Many investors are still unconvinced about the strength of the recovery, even as Covid-19 cases mount in India in the absence of a cure or vaccine. Add to that, pathetic quarterly numbers have caused heartburn. But, an analysis of PMS cash holdings for as many as 142 strategies shows that most fund managers are already looking beyond the current bleak situation, as they grab beaten-down stocks, especially in the financial sector. About 58 PMSes reduced cash levels in June compared to 37 that raised cash holding or the 34 that maintained the cash holdings. 

Cash stash

About 142 PMS strategies disclosed cash holdings for June, compared to 144 in May.

A few strategies in the PMS space appear not to believe in taking cash calls, and as such remain 100% invested. At the end of June, there were 8 PMSes with ‘nil; cash, including the likes of AccuraCap - Alpha 10 & PicoPower strategies, Motilal Oswal - IOP V2 & NTDOP strategies, and Nine Rivers Capital - Aurum Small Cap. Such schemes stood at 7 in May.  

Usually, it is considered normal to hold about 5% cash in equity portfolios. PMS strategies at the end of June with cash holding less than 5% numbered 44, including Right Horizons - Flexi Cap, Marathontrends - Megatrends, Tata - Consumption, Invesco - Dawn and Aditya Birla Capital - SSP. This compares with 36 in May. 

PMS strategies with cash holding between 5% & 10% at the end of June were 39, including, Silverarch - India Equity Portfolio, Buoyant Capital - Opportunities, Alchemy - High Growth Select Stock and 2Point2 Capital - Longer Term Value. This compares with 45 strategies in May end.

Schemes with high cash percentages deserve special mention. An equal number of 32 PMS strategies had cash holding between 10% & 20% in both May and June. Some notable examples are Phillip - Emerging India Portfolio & Signature India Portfolio, Tamohara - TLES & TIOS, Systematix - Dynamic Investment Portfolio and Ambit Investment Advisors - Emerging Giants.

As many as 11 PMS strategies have cash holding between 20% & 30% in June end compared to 14 in May end. The June list includes Composite Investments - Light House, Turtle Wealth - 212 ° Wealth Mantra, Globe Capital - Value, Green Portfolio Dividend Yield and Valentis Advisors - Multi-Cap. 

There was also a drop in PMS strategies holding 30% to 40% cash holdings. In June end there were just 4 -  Ace - Allocator, Credent - Growth Portfolio, Ace - Midcap and Prabhudas Lilladher - Fortune Strategy. This compares with 6 in May. 

There was a slight increase in PMS strategies with cash holdings between 40% & 50% at 3 in June compared to 2 in May. For those who want to know, the 3 in June are Valcreate - Life Sciences & Speciality Opportunities, Green Portfolio - MNC Advantage, and Pelican - PE Fund.

There is just 1 fund with cash holding more than 50% at the end of June. It is First Global - Indian Multi Asset. The cash & equivalent portion also has a gold component. In May end, there were 2 such strategies with extremely high cash levels. 

Interesting moves

Cash can both be a boon or bane for portfolios. In a falling market, cash acts as a shield. In a rising market, cash is a drag. However, do note that cash holdings represented here are a snap-shot on month end. 

To compare cash holdings properly, we looked at the 133 strategies that disclosed money for both May and June. There were 4 strategies that held 0% cash in both May and June.

PMSes with drop in cash holdings outnumber those who maintained or reduced moolah. In total, about 58 PMSes reduced cash levels in June compared to 37 that saw a rise in cash holdings or the 34 that appeared to have maintained cash levels in June over May.. 

First let's look where cash levels fell. As many as 33 PMS strategies showed decline in cash holdings by 1% to 5% points in June over May. The long list includes First Global - The India Super 50, Quest - Multi, Ambit - Coffee Can, Sundaram Alternates - SELF and Joindre Value.

Another 18 showed cash levels drop by 5% to 10% points in June compared to May. This list includes Centrum Micro, Alfaccurate Advisors - IOP, Kotak - Special Situation (Series 2), Satco - Growth & Momentum, and Sharekhan - Prime Picks.

As many as 7 PMS strategies, such as Alchemy - Leaders, First Global - Indian Multi Asset, Sundaram Alternates - Rising Stars, Stallion Asset - Core, Green Portfolio - Dividend Yield, Girik Capital - Multicap and Bonanza - Value, showed dip in cash holdings by more than 10% points.

On the other end of the spectrum, 5 strategies looked like increasing cash by more than 10% points in June over May. For instance, Valcreate - Life Sciences & Speciality Opportunities saw its cash level rise from 6.8% in May to a whopping 46.37% in June. Prabhudas Lilladher - Fortune Strategy also witnessed cash levels going up from 13.58% to 30.6%. Pelican - PE Fund increased cash from 26.5% to 40%, Prabhudas Lilladher - Equigrow and Multi strategies also saw sharp rise in cash holdings.  

A high rise in cash holding may not mean that the fund manager is sitting on moolah, instead it could because profit was booked in a position and the money is awaiting its next deployment. Or, there has been significant inflows, which usually takes some time to be invested. 

About 7 strategies, including Centrum - Good to Great, Acepro - Large Cap, and Capgrow - Special Situations, witnessed 5 to 10% points gain in cash levels in June over May. 

Also, 25 strategies witnessed cash levels increase in June by 1% to 5% points over May levels. 

Curiously, 34 PMS strategies appeared to maintain the same level of cash in June and May (with margin between -1% to +1% points). Some examples include Aditya Birla Capital - CEP, Sanctum - Smart Solutions, Nippon India - High Conviction, Sameeksha Capital - Equity, Abans - Smart Bela, Edelweiss - Focused Small Cap.