Liquid funds are a type of debt fund that mainly invest in debt as well as money market instruments featuring a maturity period of 90 days or less. As a result of the short maturity of these investments, bonds that a liquid fund is invested in are rarely traded on secondary markets. As a result of these investments being traded less frequently, the portfolio of a liquid fund features much lower levels of risk as compared to many other types of debt funds. The lower risk however does translate into potentially lower returns. Therefore, liquid funds are considered to be an ideal investment avenue for risk-averse investors seeking to park excess funds for short time periods to earn returns that are higher than those offered by a standard savings account. Apart from bonds, liquid funds also invest in a range of money market instruments of short maturity as well as longer maturity instruments such as treasury bills (T-bills).
Reliance Mutual Fund AMC, a leading fund house in India, offers a range of investment options to its investors including a top rated liquid fund, the Reliance Liquid Fund – Treasury Plan. Historically this open ended debt fund has provided consistent returns since inception and ensures a high level of liquidity along with low levels of overall risk to the investors. In the following sections, some of the key features of this debt mutual fund have been discussed in detail.
Reliance Liquid Fund – Treasury Plan Investment Objective and Strategy
The Reliance Liquidity Fund primarily invests in debt instruments as well as money markets in order to provide ROI consistent with relatively low levels of risk. The scheme additionally attempts to maintain a high degree of liquidity which is in line with the typical objective of liquid funds operating in the country. In terms of debt instruments, the scheme is invested in various high quality bonds including zero coupon bonds ranked A1+ and higher. Additionally, the fund also invests a significant portion of its capital in treasury bills (T-bills) which are guaranteed by the government, hence low risk investments. Occasionally, the scheme invests in relatively low quality bonds ranked AA- in order to generate accrual income from the higher coupon rate. The average maturity of debt investments made by this scheme is lower than 90 days, which ensures that the overall interest rate risk of the overall portfolio is much lower.
Tax Considerations of the Reliance Liquid Fund – Treasury Plan
The Reliance Liquid Fund – Treasury Plan is classified as a liquid debt fund as it is mainly invested in various debt and money market instruments including bonds and treasury bills (T-bills). As a result, this scheme is classified as a non-equity investment featuring applicable taxation rules. In case of non-equity funds, investment periods of 3 years or shorter are classified as short term investments. Similarly, investment tenure longer than 3 years is classified as a long term investment in case of this fund. In case of short term capital gains i.e. profits generated from Reliance Liquid Fund – Treasury Plan through unit redemption/switch within a 3 year period, the applicable tax rate is same as the income tax slab rate of the investor. If investments in the scheme are held for over 3 years from the date of unit allotment, the applicable tax rate of long term capital gains is 20% on profits with indexation benefits and 10 % if the benefit is not availed.
Key Features and Statistics of the Reliance Liquid Fund – Treasury Plan
Inception: This liquid fund was launched in December 2003.
Entry Load: As per existing rules applicable to all mutual funds in India, the entry load of the Reliance Liquid Fund – Treasury Fund is fixed at zero.
Exit Load: The exit load of this fund is zero, so the investor can withdraw his/her investment at a time of their choice (subject to minimum withdrawal amount rules) without incurring any additional charges with respect to exit loads.
Minimum Investment Amounts: For new investors seeking to invest in the scheme, the minimum lump sum investment amount is currently Rs. 100. The fund also features the option of minimum additional investment of Rs. 100 for existing investors of the scheme. In case of lump sum withdrawal, the minimum withdrawal amount is Rs. 100, while minimum amount for withdrawals made through a systematic withdrawal plan (SWP) is fixed at Rs. 500.
Fund Manager: The Reliance Liquid Fund – Treasury Plan is currently managed by Ms. Anju Chhajer, who took her position as the fund’s manager in October 2013. Prior to becoming a fund manager with Reliance Mutual Fund AMC, Ms. Chhajer worked with leading organizations in the BFSI sector such as D.C. Dharewa & Co. as well as the National Insurance Company.
Plans and Options for Reliance Liquid Fund – Treasury Plan
Direct Plan: If you are seeking marginally higher returns as a result of a lower expense ratio applicable to your scheme units, you have the option of investing in the direct plan of the Reliance Liquid Fund – Treasury Plan. However, this is available only to investors making direct transactions with Reliance Mutual Fund AMC and this variant features a slightly higher NAV than the regular plan of the liquid fund scheme. The direct plan allows investors to opt for both the growth and dividend (reinvest/payout) option. At present only a small number of investors opt for direct plans as they are available through select investment routes only.
Regular Plan: The regular plan of Reliance Liquid Fund – Treasury Plan is available to investors making their scheme investments either directly with Reliance Mutual Fund AMC or through a registered 3rd party intermediary such as Paisabazaar.com. Compared to the direct plan of the scheme, the regular plan features a lower NAV as well as a higher expense ratio, but this plan is a lot easier to avail. Over the long term, the regular plan offers only slightly lower returns as compared to the direct plan of the scheme.
Growth Option: For investors seeking capital appreciation of their investment with no interim payouts while invested, the growth option may be most suitable. Available to both regular and direct plan investors, the growth option reinvests profits generated by the scheme’s existing investments to grow the fund’s AUM further in order to increase its NAV. The increase in NAV translates to short and long term capital gains for the investors redeeming or switching their units at a later date.
Dividend Option: In case you are looking to make an investment capable of delivering periodic income while you are invested in the scheme, the dividend option of the Reliance Liquid Fund – Treasury Plan may be suitable for you. The fund, at its discretion, may decide to make dividend payouts on a per unit basis if you are invested in the dividend payout or dividend-reinvest options. The dividend payout on a per unit basis decreases the NAV of the fund by the same amount hence capital appreciation is a secondary objective for this scheme option.
Top Holdings of Reliance Liquid Fund – Treasury Plan
The following are some of the leading debt investments of the Reliance Liquid Fund – Treasury Plan.*
|Debt/Money Market Instrument Type||Instrument Issuer/Company|
|CRISIL/CARE/ICRA AAA||Rural Electrification Corporation Limited (9.06%), Power Finance Corporation (8.9%), Kotak Mahindra Prime Limited (9.15%), Power Finance Corporation Limited (8.91%), LIC Housing Finance Limited, HDB Financial Services Limited, etc.|
|CRISIL/CARE/ICRA A1+||Axis Bank Limited, HDFC Bank Limited, IDFC Bank Limited, RBL Bank, IndusInd Bank Limited, ICICI Bank Limited, etc.|
|CARE AA-||JSW Steel Limited (10.20%), etc.|
|Fixed Deposits||Deutsche Bank, Citibank, etc.|
|Money Market Instruments||HDFC Ltd., NABARD, Export Import Bank of India, Hindustan Zinc Limited, LIC Housing Finance Limited, Tata Steel Limited, Aditya Birla Finance Limited, Bharat Aluminimum Company Limited, Gruh Finance Limited, Tata Capital Financial Services Limited, Citicorp Finance India Limited, India Infoline Finance Limited, Nabha Power Limited, Reliance Industries Limited, Vedanta Limited, etc.|
|Others||Cash Margin- CCIL, Treasury Bills (various rates), etc.|
*The above list is an illustration only and changes to these investments are expected to occur based on fund manager’s perspectives and regulatory guidelines of SEBI.
Investing in Reliance Liquid Fund – Treasury Plan through Paisabazaar.com
The Paisabazaar.com portal features an easy to use mutual funds investment platform that novice as well as seasoned investors can use to make mutual fund investments. This robust system is completely online with Aadhaar-based KYC support, which allows new investors to complete their mutual fund KYC online using only their Aadhaar card number and PAN card. In case of existing mutual fund investors, KYC status verification is completed in less than a minute allowing them to start investing with the fund house of their choice immediately.
Paisabazaar.com has tie-ups with most leading fund houses in India and it offers investors the opportunity to invest in a wide range of regular plans of mutual funds across the equity, debt and hybrid categories. Among these, we also offer the regular plan of the Reliance Liquid Fund – Treasury Plan which is managed by Reliance Mutual Fund AMC, a top-notch fund house in India. Using your Paisabazaar.com account, you can easily choose your investment option – lump sum or SIP and make your payment online using the net banking facility of most Indian banks. On completion of the transaction, units of the chosen fund are allocated to the investor as per the applicable NAV. Our services are completely free for our investors and we do not charge any brokerage or portfolio management fees.