The most favored option of many risk-averse investors is to invest in Bank saving account and/or fixed deposits, as it is a convenient hassle-free, low risk avenue and can generate decent returns over a period of time.

However, with the changing investment environment and considerable fall in FD interest rates that reduced considerably from 8-10% per annum to now around 5-7% per annum, investors are looking for better alternative investment options. Some small banks might be offering higher interest rates but it is not worthwhile to take that risk because the second wave of COVID-19 is expected to amplify the stress on the banking system.

For investors, the better alternative for saving account/fixed deposits is to allocate an adequate portion of their investment corpus in pure Liquid Funds. Liquid Funds are considered to be the safest and highly liquid in debt mutual fund category as they typically invest in debt and money market instruments having a maturity of up to 91 days.

TRUST Mutual fund, the latest entrant in the mutual fund business has launched TRUSTMF Liquid Fund, an open-ended Liquid Scheme.

On the launch of this fund, Mr Sandeep Bagla CEO of TRUST Mutual Fund said, “We believe in coming out with differentiated and relevant solutions for our investors. Trust MF Liquid Fund will invest only in those select companies’ papers, whose long-term rating is high and stable as well. Not all companies with highest short-term rating enjoy high ratings on the long term rating scale.”

Table 1: Details of TRUSTMF Liquid Fund

Type An open-ended Liquid Scheme Category Liquid Fund
Investment Objective The objective of the scheme is to provide reasonable returns at a high level of safety and liquidity through investments in high quality debt and money market instruments. However, there can be no assurance that the investment objective of the scheme will be realised.
Min. Investment Rs 1000/- and in multiples of Re 1 thereafter. Additional purchase Rs 1000/- and in multiples of Re 1 thereafter. Face Value Rs 10/- per unit
SIP/STP/SWP Available
  • Direct
  • Regular
  • Growth
  • Dividend
Entry Load Not Applicable Exit Load In respect of each purchase of Units: Investors exit upon subscription and Exit load as a % of redemption proceeds (including systematic transactions) Up to Day 1 – 0.0070%
Day 2 – 0.0065%
Day 3 – 0.0060%
Day 4 – 0.0055%
Day 5 – 0.0050%
Day 6 – 0.0045%
Day 7 onwards – Nil
Fund Manager – Mr Anand Nevatia Benchmark Index CRISIL Liquid Fund Index
Issue Opens: April 08, 2021 Issue Closes: April 22, 2021

(Source: Scheme Information Document)

What will be the Investment Strategy for TRUSTMF Liquid Fund?

The TRUSTMF Liquid Fund aims to build a portfolio by predominantly investing in high quality debt and money market instruments of the issuers having a long-term AAA rating.

The fund emphasizes on the key fact that the highest short-term rating does not necessarily translate into highest long-term rating. In reality, an issuer with lower long-term rating could be given higher short-term rating as well. The fund management team endeavours to maintain consistent performance in the scheme by maintaining a balance between safety, liquidity and profitability aspects of various investments.

TRUSTMF Liquid Fund will invest 15-25% of its assets in CPs issued by PSU, 35-50% in CPs issued by Private units, 20-30% in CDs, and 30-50% in Sovereign rated papers/cash.

The fund will follow structured investment approach in accordance with ‘LimitedACTIV’ methodology that will try to achieve an optimal risk-return balance for management of the fixed income portfolios.

The fund management team will take an active view of the interest rate movement by keeping a close watch on various parameters of the Indian economy, as well as developments in global markets. Investment views/decisions will be taken based on the following parameters: 

  1. Prevailing interest rate scenario.

  2. Quality of the security/ instrument (including the financial health of the issuer).

  3. Maturity profile of the instrument with segmental allocations.

  4. Liquidity of the security.

  5. Growth prospects of the company/industry.

  6. Any other factors in the opinion of the fund management team.

Being a Liquid Fund this scheme will invest 100% of it’s assets in Money market & Debt instruments [including Tri-Party Repo/ Reverse Repo (including Corporate Bond Repo)] with maturity up to 91 days.

Under normal circumstances, asset allocation will be as under:

Table 2: Asset Allocation of TRUSTMF Liquid Fund

Instruments Indicative Allocation (% of net assets) Risk Profile
Minimum Maximum High/Medium/Low
Money market^ & Debt instruments* [including Tri-Party Repo/ Reverse Repo (including Corporate Bond Repo)] with maturity up to 91 days 0 100 Low

^Money market instruments would include certificate of deposits, commercial papers, T-bills, reverse repos and TREP, bill rediscounting, bills of exchange / promissory notes and government securities with unexpired maturity of 1 year and such other instruments as eligible from time to time.

*Debt instruments would include all debt securities issued by entities such as banks, companies, public sector undertakings, body corporates, central government securities, state development loans and UDAY bonds, recapitalization bonds, municipal bonds and G-Sec repos and any other instruments as permitted by regulators from time to time.

(Source: Scheme Information Document)

Who will manage TRUSTMF Liquid Fund?

Mr Anand Nevatia will be the dedicated fund manager for TRUSTMF Liquid Fund

Mr Anand Nevatia is Fund Manager – Fixed Income Segment at TRUST Asset Management Pvt. Ltd. and has over 11 years of work experience in financial services industry. Prior to this, he was working for Portfolio Management activity at TRUST Investment Advisors Pvt. Ltd. and TRUST Capital Services towards developing and maintaining client relationships, research and analysis, providing advisory services to clients. Mr Nevatia is a CFA and MBA; currently he manages TRUSTMF Banking & PSU Debt Fund.

Fund Outlook – TRUSTMF Liquid Fund

TRUSTMF Liquid Fund aims to achieve its investment objective by investing in instruments of issuers having long-term AAA rating while applying liquidity, stability and quality criteria to ensure a high quality portfolio.

The Fund Manager Mr Anand Nevatia said, “We will be creating a portfolio with weights based on outstanding issuance amounts, consisting of highest rated issuers with high liquidity. Our liquidity will be high as portfolio liquidity depends on credit quality & liquidity of its investments and not on the size of the portfolio.”

Do note that while the interest rate risk in liquid fund is low, it may carry credit risk especially if the fund holds higher allocation to moderate and low rated instruments in a bid to generate higher returns.

To mitigate the credit risk it is better to invest in funds predominantly holding securities issued by public sector units because they are highly liquid and enjoy high credit rating. Avoid funds that rely mainly on securities issued by private entities. The primary focus of liquid fund is to provide safety, returns are secondary.

TRUSTMF Liquid Fund is suitable for investors seeking liquid and safe investment avenue for their short-term goals.  

This article first appeared on PersonalFN here

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