Bajaj Finserv AMC Launches Liquid And Overnight Funds: Know Their Differences

Bajaj Finserv AMC launched two new funds today: Bajaj Finserv Liquid Fund and Bajaj Finserv Overnight Fund. Read on to learn their distinct features.
Bajaj Finserv AMC Launches Liquid And Overnight Funds: Know Their Differences

Bajaj Finserv AMC has debuted in the mutual fund market with two debt funds, Bajaj Finserv Liquid Fund and Bajaj Finserv Overnight Fund.  

The new fund offers (NFOs) for both funds will run from June 29 to July 4, 2023.

The Bajaj Finserv Liquid Fund is an open-ended scheme primarily investing in debt and money market instruments with a maximum maturity of 91 days. This fund is ideal for investors seeking an emergency fund with easy liquidity and quick redemption options, the AMC says.

On the other hand, the Bajaj Finserv Overnight Fund invests in money market and debt instruments with overnight maturity. Entrepreneurs and corporates, who need to park substantial sums of money temporarily, can benefit from this fund's short-term investment strategy.

Maturity And Risk

Bajaj Finserv Liquid Fund is designed for investors seeking regular income over the short term. It invests in the money market and debt instruments with 91-day maturity. According to the scheme document, the principal amount could be at low to moderate credit risk.

In comparison, the Bajaj Finserv Overnight Fund is suitable for investors seeking regular income that aligns with the overnight call rates. It invests in overnight securities with relatively low-interest rate risk and credit risk.

Ganesh Mohan, chief executive officer of Bajaj Finserv AMC, says liquid fund provides a balance between liquidity and returns, while overnight fund ensures growth in the short term.

Distinct Features of the Funds

According to the Association of Mutual Funds in India (Amfi), overnight funds, as the name suggests, have a one-night maturity period and do not have any exit load. On the other hand, liquid funds mature in 91 days and have graded exit loads, which reduce to zero after six days.

Regarding time horizon and risk profile, overnight funds rank slightly below liquid funds due to the former's shorter maturity. Liquid funds are free to invest in any money-market instruments, like certificates of deposits (CDs) and commercial papers (CPs), maturing within 91 days, irrespective of their credit quality.

Overnight funds are preferable for short-term parking of surplus cash due to their lack of exit load. Conversely, liquid funds can be chosen for longer periods, over a week. Due to their ability to manage credit risk more flexibly due to longer maturity, liquid funds typically offer higher returns than overnight funds. However, consult a financial advisor and decide as per your investment goals.

Both these debt funds are available through mutual fund distributors and the company's digital platforms. Bajaj Finserv AMC also plans to launch equity and hybrid products in the near future.

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