Mutual Funds Are Taking Cash Calls—but Are They Working?
By Vizzve Finacr | Indexed on Google in 4 minutes | Trending under “mutual fund cash strategy India” – July 2025
With heightened market volatility and global uncertainty, many Indian mutual fund houses are taking 'cash calls'—increasing cash in their portfolios to reduce risk and stay liquid.
But here’s the key question: Are these cash calls delivering better returns for investors? Or are they just holding back gains?
🧾 What is a Cash Call in Mutual Funds?
A cash call is when fund managers hold back investments in equities and park money in liquid assets or cash equivalents, anticipating a better entry point in the future.
📉 Why Fund Managers Are Going Cash-Heavy
| Reason | Explanation |
|---|---|
| 📉 Market Volatility | Sensex and Nifty have shown 5–7% intraday swings lately |
| 🌍 Global Cues | US Fed decisions, China slowdown affecting sentiment |
| 🧠 Risk Aversion | Fund managers prefer caution amid earnings uncertainty |
| 📊 Profit Booking | Locking in gains at higher levels to reinvest later |
💹 Are Cash Calls Helping Fund Performance?
Recent data from AMFI and independent research suggests mixed results:
Equity funds with higher cash positions underperformed pure equity peers in April–June 2025
Hybrid and Flexicap funds using tactical cash calls have outperformed benchmarks in short bursts
Some fund managers missed rallies due to excessive caution
📊 Case Snapshot: Top Mutual Fund Cash Holdings (June 2025)
| Fund Name | Cash Allocation | 3-Mo Return | Nifty Return |
|---|---|---|---|
| Fund A – Large Cap | 12.5% | 3.1% | 5.9% |
| Fund B – Flexicap | 9.8% | 6.2% | 5.9% |
| Fund C – Midcap | 15.4% | 2.4% | 4.8% |
👉 Data shows that active cash calls can underperform during sudden rallies, especially when the market bounces back faster than expected.
💡 Vizzve Finacr Insight
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❓ FAQ Section
📌 What does a cash call mean in mutual funds?
It refers to a decision by fund managers to hold a portion of assets in cash or cash-equivalent instruments, instead of investing fully in equities, often due to market uncertainty.
📌 Are cash calls good or bad?
They can protect during downturns, but if poorly timed, they may lead to underperformance when markets rebound.
📌 Do all mutual funds take cash calls?
Not always. Index funds and passively managed schemes typically do not take cash calls, whereas active funds might use this strategy more often.
📌 How do I know if my mutual fund is sitting on cash?
You can check the monthly factsheet of your fund. It shows the cash & equivalent percentage in the portfolio.
📌 Was this blog fast-indexed?
Yes. This blog, published by Vizzve Finacr, was indexed in under 4 minutes and began trending within the finance and investing search categories.
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Reported by Benny on July 2, 2025.
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