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{"id":553,"date":"2019-06-29T08:41:22","date_gmt":"2019-06-29T08:41:22","guid":{"rendered":"http:\/\/blog.certifiedfinancialguardian.com\/?p=553"},"modified":"2019-07-01T06:50:31","modified_gmt":"2019-07-01T06:50:31","slug":"indiabulls-overnight-fund-should-you-invest","status":"publish","type":"post","link":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/2019\/06\/29\/indiabulls-overnight-fund-should-you-invest\/","title":{"rendered":"Indiabulls Overnight Fund: Should Investors Invest?"},"content":{"rendered":"\n

Indiabulls has launched yet another\nopen-ended debt scheme, Indiabulls Overnight Fund. <\/p>\n\n\n\n

An Overnight fund is a category of debt scheme emerged after the SEBI\u2019s recategorization norms<\/a>.<\/p>\n\n\n\n

It has the shortest\ninvestment duration of one day and provides better returns than bank FDs and\nare more liquid. The interest rate risk involved\ntherein is least or almost zero. However, there can be a reinvestment risk,\ni.e. overnight funds may not be able to reinvest their proceeds at the same\nrate of return, but at least that doesn’t cause any capital erosion.<\/p>\n\n\n\n

On the risk-return spectrum, overnight funds are placed at the lower end of the spectrum that carries the least amount of investment risk.<\/p>\n\n\n\n

[Read: <\/strong> Why Comparing Returns to Risk Is More Meaningful!<\/a>]<\/p>\n\n\n\n

Graph:\nIndicative Risk Return Matrix -Debt Categories<\/em><\/strong><\/p>\n\n\n\n

\"\"<\/figure><\/div>\n\n\n\n

\n(Source:\nPersonalFN Research)<\/p>\n\n\n\n

Since the debacle of IL&FS last<\/a> September onwards, several other companies<\/a> have been scrutinised and suffered a similar fate. This has pushed liquid funds<\/a> and debt funds category under severe stress and distressed the investors. <\/p>\n\n\n\n

[Read<\/strong>: Can You Ignore Default And Liquidity Risk While Investing In Debt Mutual Funds?<\/a>]<\/p>\n\n\n\n

Besides even the data released by AMFI for the month of May shows that there were a lesser number of inflows in debt funds of Rs 48,572 crore for the month of May 2019 as compared to April 2019 inflows of Rs 101,971 crore. From this, it is quite evident that investors have become more conservative<\/a> and vying for options that are less risky. And the overnight fund is a plausible choice for the shortest duration of one day. <\/p>\n\n\n\n

Several fund houses have been rapidly launching overnight funds in the market as they saw this as an opportunity to win back investors\u2019 confidence with respect to debt fund investments. Hence, even the Indiabulls Mutual Fund joined its peers with its Overnight Fund. <\/p>\n\n\n\n

Table 1: Details of Indiabulls Overnight Fund<\/em><\/strong><\/p>\n\n\n\n
\n Type<\/strong>\n <\/td>An open-ended debt scheme investing in overnight securities.<\/td>\n Category<\/strong>\n <\/td>Overnight Fund<\/td><\/tr>
\n Investment Objective<\/strong>\n <\/td>

To provide reasonable returns commensurate with low risk and providing a high level of liquidity, through investments made primarily in overnight securities having a maturity of 1 business day.

However, there can be no assurance that the investment objective of the scheme will be achieved. The Scheme(s) does not assure or guarantee any returns. <\/p><\/td><\/tr>

\n Min. Investment<\/strong>\n <\/td>Rs 500 and in multiples of Re 1 thereafter<\/td>\n Face Value<\/strong>\n <\/td>Rs 1,000 per unit<\/td><\/tr>
\n Plans <\/strong>\n <\/td>\n\t
    \n\t\n\t
  • Direct<\/li>\n\t
  • Regular<\/li>\n <\/ul>\n\t\n\t* Default option\n <\/td>
\n Options<\/strong>\n <\/td>\n
  • Growth*<\/li>\n
  • Dividend<\/li>\n\t
      \n\t
    • Re-investment facility*<\/li>\n\t
    • Pay-out facility<\/li>\n\t\t
    • Sweep facility<\/li>\n\t <\/ul>\n <\/ul>\n\t* Default option\n\t\n <\/td><\/tr>
\n Entry Load<\/strong>\n <\/td>Not Applicable<\/td>\n Exit Load<\/strong>\n <\/td>Nil\n \n \n <\/td><\/tr>
\n Fund Manager<\/strong>\n <\/td>Mr Malay Shah<\/td>\n Benchmark Index<\/strong>\n <\/td>CRISIL Overnight Index<\/td><\/tr>
\n Issue Opens<\/strong>\n <\/td>June 20, 2019<\/td>\n Issue Closes:<\/strong>\n <\/td>July 04, 2019<\/td><\/tr><\/tbody><\/table>\n\n\n\n

(Source: Scheme Information Document<\/a>)<\/p>\n\n\n\n

How will Indiabulls Overnight Fund\nallocate its assets?<\/strong><\/p>\n\n\n\n

Under normal circumstances, the\nscheme\u2019s asset allocation<\/a> pattern will be as under:<\/p>\n\n\n\n

Table\n2: I<\/em>OF\u2019s Asset Allocation<\/em><\/strong><\/p>\n\n\n\n\n \n \n
Instruments<\/strong><\/td>\n Indicative allocation (% of Net Assets) (Minimum-Maximum)<\/strong><\/td>\n Risk Profile (High\/ Medium\/ Low)<\/strong><\/td>\n <\/tr>\n
Overnight securities or debt instruments* maturing on or before the next business day<\/td>\n 0% to 100%<\/p><\/td>\n Low<\/td>\n <\/tr>\n<\/table>\n\n\n\n

*instruments\nwith a residual maturity not greater than 1 business day, including money\nmarket instruments^, TREPS$ \/ reverse repo, debt instruments^^, including\nfloating rate instruments, with overnight maturity. #The scheme may have\nexposure in the following:

\n^ Commercial papers, commercial bills, treasury bills, Government securities having an unexpired maturity up to one day, call or notice money, certificate of deposit, usance bill and any other like instruments as specified by the Reserve Bank of India from time to time. the pattern is to be altered for other reasons, as this is a fundamental attribute, the procedure outlined in the paragraph on fundamental attributes below, shall be followed.

\n^^Debt instruments would include all debt securities issued by entities such as banks, companies, public sector undertakings, municipal corporations, 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.

\n $ or similar instruments as may be permitted by RBI\/SEBI.

\nThe cumulative gross exposure should not exceed 100% of the net assets of the Scheme<\/p>\n\n\n\n

(Source: Scheme Information Document<\/a>)<\/p>\n\n\n\n

What will be the Investment Strategy?<\/strong><\/p>\n\n\n\n

The scheme aims to identify securities\nwhich offer an optimal level of yields\/returns, considering the risk-reward\nratio. An appropriate mix of debt market securities and money market securities\nwill be used to achieve this. The scheme will invest in Debt and money market\nsecurities getting matured on the next business day. Money Market securities\ninclude cash and cash equivalents.<\/p>\n\n\n\n

With the aim of controlling risks, rigorous\nin-depth credit evaluation of the securities proposed to be invested in will be\ncarried out by the fund manager and his team. <\/p>\n\n\n\n

The credit evaluation includes a study of:<\/p>\n\n\n\n