Nippon India Money Market Fund: An outperformer with conservative style

The fund featured in the top 30 percentile of the money market funds category in CRISIL Mutual Fund Ranking (CMFR) for 10 consecutive quarters ended June 2021

Nippon India Money Market Fund, launched in June 2005, featured in the top 30 percentile of the money market funds category in CRISIL Mutual Fund Ranking (CMFR) for 10 consecutive quarters ended June 2021. The month-end asset under management of the fund increased from Rs 1,544 crore in August 2018 to Rs 9,952 crore in July 2021.
 
Anju Chhajer has been managing the fund since February 2020. The fund’s investment objective is to generate optimal returns consistent with moderate levels of risk and liquidity by investing in money market instruments.
 
Consistently ahead

The fund has consistently outperformed its peers (funds ranked under the money market funds category in CMFR in June 2021) over the trailing periods under analysis.
 
An investment of Rs 10,000 in the fund on June 16, 2005 (fund inception date), would have grown to Rs 32,455 (7.54 per cent compound annual growth rate) on August 25, 2021, compared with Rs 31,074 (7.25 per cent) for the peer group.
 
Duration management
 
Over the past 12 months, the fund had a modified duration in the range of 0.28-0.43 year -- averaging 0.35 year, compared with 0.38 year for the peer group. Yields on government securities (G-secs) have been rising since November 2020 and the fund has maintained a shorter portfolio duration than its peers, reflecting a conservative stance.

Portfolio analysis
 
In the past three years, the fund invested predominantly in money market instruments. Allocation to certificates of deposit and commercial papers averaged 79.3 per cent.
The fund also maintained a conservative credit profile over this period by not taking exposure to securities rated below A1+. Allocation to A1+ rated securities averaged 79.3 per cent, and to sovereign securities 18.5 per cent.
 
The fund has been dynamic in managing allocations. Between mid-May and end-July this year, it increased exposure to sovereign securities from 20.4 per cent to 54.2 per cent but decreased exposure to certificates of deposit and commercial papers from 67.3 per cent to 43.3 per cent.