The Hindu Business Line : Institutional investors show interest in liquid plus fixed income funds

Kolkata, Sept.19 In the universe of fixed income funds, the liquid plus category is increasingly occupying a firmer place, a trend underlined mainly by the kind of interest it is generating among institutional investors.

Range of products

The segment is growing wider, thanks to a steady increase in the number of products that fund houses have brought to the table.

The move is spurred by their need to extend their range of products in order to cater to more clients.

The funds seek to provide decent returns without compromising liquidity — by allocating chiefly to money market instruments and shorter term debt securities. Wholesale investors, fund circles maintain, play a crucial role on this front. In a typical case, an institution needs to chip in considerably more by way of the minimum initial investment compared to a retail client.

For the latter, the minimum may be as low as Rs 5,000. For an institution, the minimum may be as high as Rs 1 crore. Most players offer ‘super institutional’ plans too.

Institutional plan

Among those that have repositioned their products is Canbank MF. The latter has recently re-jigged Can Short Term Plan to Can Liquid Plus. Institutions will have to put in a minimum Rs 50 lakhs in its institutional plan.

There are several other such instances. Quite a few liquid plus funds (for institutional investors) are available at the moment, it is pointed out. Their average one-year return, some sections insist, (need not be the ideal duration of investment in the current circumstances) is 7.5 per cent, according to Value Research.

Some of the better performing funds in the category are managed by ABN AMRO (8.34 per cent), DBS Chola (7.69 per cent) and Birla Sun Life (7.65 per cent).

These figures relate to September 14, 2007. The top-performer, ABN AMRO Money Plus — Institutional, has exposure to CPs (34 per cent), CDs (30 per cent) and bonds (28 per cent).

New players

AIG, JP Morgan and Fidelity, all of which have forayed into the Indian market in recent times, have offered liquid plus funds.

For each the first two, AIG India Treasury Plus and JP Morgan Liquid Plus, the new fund offer closes on September 20.

The former is rated AAAf by Crisil.

These will be among the first income schemes launched by the two fund houses; both AIG and JP Morgan had flagged off their businesses with equity funds.

Fidelity too has lined up a liquid plus fund, which will carry an mfA1+ rating by ICRA. There will be no entry load.

However, a 0.1 per cent exit load will be charged if an investor redeems within five calendar days from the date of allotment or purchase.

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