This week in Groww’s, “Fund of the Week” we discuss about a liquid fund representing a major mutual fund house.

Previously known as Reliance Liquid Fund – Treasury Plan, the fund has been one of the top performers in the liquid fund category.

But before delving deep into the details of the fund, let us first understand about liquid funds.

What are liquid funds?

Liquid funds are a type of debt mutual funds that invest money in short-term market instruments which include treasury bills, government securities and call money.

These types of instruments hold the least amount of risk.

One peculiar feature of such kind of funds is that they can invest up to a maturity of 91 days. However, the maturity is mostly much lower than that.

Liquid funds are the least risky and volatile in the category of mutual funds for the following reasons:

1. Firstly, such kind of mutual funds mostly invest in instruments with high credit rating (A1+);

2. Also, unlike other funds, the NAV of liquid funds is not as volatile as the change in the NAV.

Mostly due to the interest income that accrues.

In other words, given the short-term maturity of liquid funds, these instruments are hardly traded in the market; meaning, they are not held till maturity.

Hence, their NAV only sees a change to the extent of interest income accrued during the short holding period.

Now, let us begin with the details of Reliance Liquid Fund so that we as investors can make informed decision about our investments.

Key Details

Particulars Reliance Liquid Fund
Fund House Reliance Mutual Fund
Scheme Open Ended
Class Liquid (Debt)
Inception Date 01/01/2013
NAV (As on 14/10/2018) 4407.3
Fund Size 39,634 crs
Category Benchmark CRISIL Liquid Fund Index
Minimum SIP Amount 100
Minimum for Second Investment 100
Expense Ratio 0.15%
Risk Level Low
Fund Manager Anju Chajjer
Ratings by Groww 3 star
Exit Load No exit load
CEO Mr. Sundeep Sikka

The best thing to cheer about is that there is no entry or exit load in this fund. Therefore, investors can invest or withdraw money without facing the burden of any upfront or withdrawal fees.

Investment Philosophy

The fund follows the below mentioned points while making investments:-

1. It focuses on maximizing returns, while at the same time ensures adequate liquidity through investments in various money market and debt instruments that have a maturity of up to 91 days;

2. The average maturity of the fund ranges between 30-60 days under normal market conditions;

This is the reason it is best for investors thinking of making short-term bets in order to gain some returns in the market.

Top 10 Holdings

Name % of Assets Sector Instrument Rating/ Size
Union Bank of India Ltd. 5.0% Financial Services FD Mid Cap
Treasury Bill (91D) 2.7% Sovereign T Bill Sovereign
NABARD (62D) 2.5% Financial Services CP A1+
Axis Bank Ltd. 2.5% Financial Services CD A1+
HDFC Ltd. (76D) 2.5% Financial Services CP A1+
HDFC Ltd. (91D) 2.4% Financial Services CP A1+
Axis Bank Ltd. 1.9% Financial Services CD A1+
HDFC Ltd. (85D) 1.7% Financial Services CP A1+
NABARD (91D) 1.5% Financial Services CP A1+
Vedanta Ltd. (91D) 1.4% Metals CP A1+

The top 10 holdings are diversified in terms of instruments invested and the credit rating of such investments is also in the top quartile.

The break-up of the asset allocation in various instruments is shown below:

Instrument Percentage Allocation (%)
Commercial Papers 78.64%
Certificate of Deposit 21.70%
Cash and other receivables (12.06%)
Treasury Bill 10.13%
Corporate Bond 0.76%
Bills Rediscounting 0.63%
Zero Coupon Bond 0.20%

The asset allocation reflects that the default risk associated with this fund is almost nil.

It invests in commercial papers, certificate of deposits of the best companies, which enjoy credit rating of AAA and A1+ from renowned credit rating agencies such as CRISIL and ICRA.

Therefore, we as investors can be assured that there is hardly any credit risk associated with this.

Returns

Reliance Liquid Fund
Fund Name 1Y 3Y 5Y Category Risk
Reliance Liquid Fund - Direct - Growth 7.35% 7.34% 7.97% Debt
(Liquid)
Low

The returns generated by Reliance Liquid Fund has beaten its category average of CRISIL Liquid Fund.

Therefore, we as investors can expect greater returns than generated by the category benchmark.

             Debt Sector Allocation
               Debt Credit Rating

Let’s Compare

Let us now see how this fund fares with other similar funds in the same category

Other similar funds Returns over the years Minimum SIP Investment Fund Size (in crs) Expense Ratio Rating
1Y 3Y 5Y
Reliance Liquid Fund 7.20% 7.30% 8.00% 100 39,634 crs 0.15% 3 Star
Indiabulls Liquid Fund 7.20% 7.40% 8.10% 500 6,046 crs 0.10% 5 star
DSP Liquidity Fund 7.30% 7.30% 8.00% 17,770 crs 0.11% 3 Star
ICICI Prudential Liquid Fund 7.20% 7.30% 8.00% 500 47,395 crs 0.15% 5 Star
Mirae Asset Cash Management Fund 7.20% 7.20% 7.8% 1000 867 crs 0.08% 3 Star

The returns have been more than the category benchmark and in line with most similar funds in the industry.

Though the expense ratio is at a higher side as compared to some other funds in the category, what differentiates Reliance Mutual Fund is its minimum SIP investment which starts at Rs. 100.

Therefore, any retail marginal investor can easily opt for this plan without having to think much about this minor expense.

Reliance Liquid Fund – Fund Manager Details

Ms. Anju Chhajer is a debt fund manager at Reliance Nippon Life Asset Management Limited since October 2007. She manages investments for debt schemes at the firm.

Education

Ms. Chhajer is a Chartered Accountant and has also received B.Com degree from Shib Nath Shastri College Kolkata in 1993.

Prior Experience

He worked in the Treasury Operations Department at National Insurance Co. Ltd. Prior to that; she was employed at D.C. Dharewa & Co. from December 1996 to November 1997.

Other funds managed

Some of the other funds managed by the Ms Chhajer are as follows:-

  • Reliance Japan Equity Fund
  • Reliance US Equity Opportunities Fund
  • Reliance Equity Savings Fund
  • Reliance Ultra Short Duration Fund
  • Reliance Low Duration Fund

These were the best fund managers of 2018

Conclusion

This liquid fund is suitable for investors who are seeking the following:

  • Looking to earn a stable short-term income
  • Looking to invest in debt and money market instruments;

Given the benefits provided by Reliance Liquid Fund, we can think of employing our hard earned money in this fund.

Also, given the returns provided by savings accounts where most of us keep our money, we can shift the cash to this liquid fund which will provide more than double the returns than provided by savings account.

Happy Investing!

Conclusion: The views expressed in this post are that of the author and not those of Groww