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.
In this article
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.
|Particulars||Reliance Liquid Fund|
|Fund House||Reliance Mutual Fund|
|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|
|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.
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 (%)|
|Certificate of Deposit||21.70%|
|Cash and other receivables||(12.06%)|
|Zero Coupon Bond||0.20%|
The asset allocation reflects that the default risk associated with this fund is almost nil.
Therefore, we as investors can be assured that there is hardly any credit risk associated with this.
|Fund Name||1Y||3Y||5Y||Expense Ratio||Turnover Ratio||Category||Risk|
|Reliance Liquid Fund - Direct - Growth||7.63%||7.31%||7.86%||0.15%||NA||Debt
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.
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|
|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.
Ms. Chhajer is a Chartered Accountant and has also received B.Com degree from Shib Nath Shastri College Kolkata in 1993.
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
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.
Conclusion: The views expressed in this post are that of the author and not those of Groww