{"id":721,"date":"2019-07-22T09:31:01","date_gmt":"2019-07-22T09:31:01","guid":{"rendered":"http:\/\/blog.certifiedfinancialguardian.com\/?p=721"},"modified":"2019-07-22T12:31:15","modified_gmt":"2019-07-22T12:31:15","slug":"is-it-advisable-for-investors-to-invest-money-in-canara-robeco-overnight-fund-for-immediate-liquidity-needs","status":"publish","type":"post","link":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/2019\/07\/22\/is-it-advisable-for-investors-to-invest-money-in-canara-robeco-overnight-fund-for-immediate-liquidity-needs\/","title":{"rendered":"Is It Advisable For Investors To Invest Money In Canara Robeco Overnight Fund For Immediate Liquidity Needs?"},"content":{"rendered":"\n

Almost a year ago, Infrastructure Leasing & Financial Services (IL&FS) downgrading episode was reported. This pushed liquid funds<\/a> and debt funds category under severe stress, soon similar corporates shared a similar fate.<\/p>\n\n\n\n

Owing to these cases, Debt Mutual Funds\nwere drastically hit since several fund houses had been holding debt\ninstruments issued by these downgraded corporates in an endeavour to achieve\nhigher returns as compared to the bank FDs.<\/p>\n\n\n\n

So, when most of the\nliquid funds posted steep losses. It made the investors aware that debt fund\ninvestment isn\u2019t completely risk-free.<\/p>\n\n\n\n

The damage done to the investors’ portfolios was far too much and so the investors have almost lost interest in investing debt funds. Investors have become more conservative<\/a>, and to achieve their short-term investment goals they are looking for options that are less risky.<\/p>\n\n\n\n

So, to retain the investors\u2019 interest, many mutual fund houses have been launching overnight funds. Overnight fund<\/a> is a category of debt scheme emerged after the SEBI\u2019s recategorization norms<\/a>. It is one of the lesser known category of debt mutual funds, that is being considered now due to its shortest investment duration of one day and provides better returns than bank FDs and are more liquid.<\/p>\n\n\n\n

Besides in terms of\nrisk, the interest rate risk involved of an overnight\nfund is least or almost zero but there can be a reinvestment risk, i.e. overnight funds may not be\nable to reinvest their proceeds at the same rate of return, and that doesn’t\ncause any capital erosion.<\/p>\n\n\n\n

Thus, on the\nrisk-return spectrum, overnight funds are placed lowest that carries the least\namount 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

Canara Robeco Mutual Fund has launched an open-ended debt scheme, Canara Robeco Overnight Fund (CROF).  The scheme will invest predominantly in debt, money market instruments and cash & cash equivalents having a maturity of one business day. <\/p>\n\n\n\n

Thus, it is suitable for conservative investors who want to invest their savings for a time period of one month or less than a year, build an emergency fund and want to earn a reasonable return with high liquidity.<\/p>\n\n\n\n

Table\n1: Details of Canara Robeco<\/em>\nOvernight 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>\n Mid Cap Fund\n <\/td><\/tr>
\n Investment Objective<\/strong>\n <\/td>\n To generate returns commensurate with low risk and providing high level of liquidity, through investments made primarily in overnight securities.
\n However, there can be no assurance that the investment objective of the Scheme will be realized.\n <\/td><\/tr>
\n Min. Investment<\/strong>\n <\/td>\n Rs 5000 and in multiples of Re 1 thereafter\n <\/td>\n Face Value<\/strong>\n <\/td>\nRs 1,000 per unit\n <\/td><\/tr>
\n Plans <\/strong>\n <\/td>\n \u2022 Direct*\n\t
\n \u2022 Regular

* Default option\n <\/td>		\n Options<\/strong>\n <\/td>\n \u2022 Growth*
\n \u2022 Daily Dividend Reinvestment

* Default option\n <\/td><\/tr>
\n Entry Load<\/strong>\n <\/td>\nNot Applicable\n <\/td>\n Exit Load<\/strong>\n <\/td>Nil\n <\/td><\/tr>
\n Fund Manager<\/strong>\n <\/td>\nMs Suman Prasad\n <\/td>\n Benchmark Index<\/strong>\n <\/td>\n CRISIL Overnight Fund Index\n <\/td><\/tr>
\n Issue Opens<\/strong>\n <\/td>\n \n July 19, 2019\n <\/td>\n Issue Closes:<\/strong>\n <\/td>\n \n July 23, 2019\n <\/td><\/tr><\/tbody><\/table><\/center>\n\n\n\n

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

How will Canara Robeco 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:  CR<\/em>OF\u2019s Asset Allocation<\/em><\/strong><\/p>\n\n\n\n

\n \n \n \n
Instruments<\/strong><\/td>\n Indicative allocation (% of net Assets) <\/strong><\/td>\n Risk Profile<\/strong><\/td>\n <\/tr>\n
Minimum<\/strong><\/td>\n Maximum<\/strong><\/td>\n High\/ Medium\/ Low)<\/strong><\/td>\n <\/tr>\n

Overnight Securities* <\/td>\n

0<\/td>\n 100<\/td>\n Low<\/td>\n <\/tr>\n<\/table><\/center>\n\n\n\n

*Overnight\nSecurities: Debt and money market instruments with overnight interest rate risk\nsuch as debt instruments with one business day residual maturity. Overnight\nsecurities include synthetic overnight positions such as reverse repo\/tri-party\nrepo & other transactions where the interest rate is reset every business\nday.<\/p>\n

Investments will be made in line with the asset allocation of the scheme and the applicable SEBI and\/or AMFI guidelines as specified from time to time. <\/p>\n

Investment by Scheme in Securitized debt is limited to domestic securitized debt and shall not exceed 10% of the net assets as on the date of such investments. <\/p>\n\n\n\n

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

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

The funds will be invested in Debt & Money Market Instruments (with residual maturity not greater than 1 business day,) offering reasonable liquidity and returns, with risk perceived by the Investment Manager. Investments under the Canara Robeco Overnight would be made predominantly in TREPS (Tri party Repo Dealing and Settlement), overnight reverse repos and fixed income securities\/instruments with overnight maturity. <\/p>\n\n\n\n

The portfolio of the scheme will be constructed and managed to generate returns to match the investment objective and to maintain adequate liquidity to accommodate funds movement.<\/p>\n\n\n\n

As per the guidelines of RBI, Mutual Funds\nhave currently ceased to access the call money market. The Canara Robeco\nOvernight Fund therefore proposes to avail facility of reverse repos \/ TREPS\n(Tri party Repo Dealing and Settlement) to temporarily invest for short term\nliquidity and to meet redemption \/ repurchase requirements.<\/p>\n\n\n\n

The investments may be made in primary as\nwell as secondary markets. As far as possible, the portfolio of the scheme will\nbe adequately diversified to reduce the risk of underperformance, arising out\nof unexpected security-specific factors. Investments will be made in State \/\nCentral Government Securities, Treasury Bills supported by the:<\/p>\n\n\n\n

  1. Ability to borrow from the\nTreasury<\/li>
  2. Sovereign guarantee or of the\nState Government<\/li>
  3. Government of India \/ State\nGovernment in any other manner.<\/li><\/ol>\n\n\n\n

    Table 3: Risk\nassociated with Debt instruments that the scheme would invest into<\/em><\/strong><\/p>\n\n\n\n

    \n Instruments<\/strong>\n <\/td>\n Credit risk<\/strong>\n <\/td><\/tr>
    \n Call Money Lending\n <\/td>\n Low\n <\/td><\/tr>
    \n MIBOR\n <\/td>\n Low\n <\/td><\/tr>
    \n Central Govt\n <\/td>\n Sovereign\n <\/td><\/tr>
    \n 1y Tbill\n <\/td>\n Sovereign\n <\/td><\/tr>
    \n 10y G Sec\n <\/td>\n Sovereign\n <\/td><\/tr>
    \n 3m PSU Bank CD\n <\/td>\n Low to Medium\n <\/td><\/tr>
    \n 3m NBFC CP\n <\/td>\n Low\n <\/td><\/tr>
    \n 10y G Sec\n <\/td>\n Low\n <\/td><\/tr><\/tbody><\/table><\/center>\n\n\n\n

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

    The Scheme will seek to underwrite issuance\nof Government Securities if any, within the as per the prevailing rules and\nregulations by SEBI \/ RBI. The Scheme may also participate in their auction\nfrom time to time.<\/p>\n\n\n\n

    Who will manage the Canara Robeco Overnight Fund?<\/strong><\/p>\n\n\n\n

    The Canara Robeco Overnight Fund will be managed by Ms Suman\nPrasad.<\/p>\n\n\n\n

    Ms Prasad holds a post graduate diploma in\nmanagement studies with a specialization in finance and is well experienced the\nfixed income space.<\/p>\n\n\n\n

    As the lead fund manager, Ms Suman Prasad manages Canara Robeco Short Duration Fund<\/a> and Canara Robeco Fixed Maturity Plan Series 8<\/a> at the fund house. <\/p>\n\n\n\n

    Table 4: Performance of the Schemes managed by Ms Suman Prasad<\/em><\/strong><\/p>\n\n\n\n

    \n \n \n \n
    Scheme Name<\/strong><\/p><\/td>\n SI Benchmark Name<\/strong><\/p><\/td>\n Managing Since<\/strong><\/p><\/td>\n Scheme Returns (%)<\/strong><\/p><\/td>\n Benchmark Returns (%)<\/strong><\/p><\/td>\n <\/tr>\n
    Canara Rob FMP-8<\/a><\/p><\/td>\n Crisil Short Term Bond Fund Index<\/p><\/td>\n Oct-18<\/p><\/td>\n 8.82<\/p><\/td>\n 7.96<\/p><\/td>\n <\/tr>\n
    Canara Rob Short Duration Fund<\/a><\/p><\/td>\n Sep-12<\/p><\/td>\n 7.20<\/p><\/td>\n 7.20<\/p><\/td>\n <\/tr>\n<\/table>\n<\/center>\n\n\n\n

    Data as on July 19, 2019
    (Source: ACE MF-PersonalFN Research)<\/p>\n\n\n\n

    As can be seen from the table, Canara Rob\nFMP-8, has managed to outperform the benchmark index and the returns of the Canara\nRob Short Duration Fund has been in line with the benchmark returns. <\/p>\n\n\n\n

    Some of the other schemes which she co-fund manages at the fund house are;  Canara Robeco Ultra Short Term Fund<\/a>, Canara Robeco Savings Fund<\/a>, Canara Robeco Liquid Fund<\/a>, Canara Robeco Gold Exchange Traded Fund<\/a>, Canara Robeco Gold Savings Fund<\/a>, Canara Robeco Capital Protection Oriented Fund – Series 7<\/a>, Canara Robeco Capital Protection Oriented Fund – Series 8<\/a>, Canara Robeco Capital Protection Oriented Fund – Series 9<\/a>, and Canara Robeco Dual Advantage Fund Series 1<\/a>.<\/p>\n\n\n\n

    The outlook for Canara Robeco Overnight\nFund:<\/strong><\/p>\n\n\n\n

    Canara Robeco Overnight Fund will invest predominantly in overnight securities in an endeavour to achieve the stated objective of the scheme. The fund manager and her team will do rigorous in-depth credit evaluation of the issuers before making investments. <\/p>\n\n\n\n

    As part of credit evaluation, a study on the operating environment, past track record as well as future prospects of the issuer, short as well as long term financial health of the issuer will be carried out. The AMC will be guided by the ratings of accredited agencies such as CRISIL, CARE, ICRA etc. as well as the internal norms for credit exposure. Plus, concentration risk will be mitigated by defining issuer limits.<\/p>\n\n\n\n

    Government\nand Public Sector Enterprises are the predominant borrowers in debt markets.\nInitially, the debt markets were regularised, and the interest rate was in line\nwith the repo rates.  But lately there\nhas been rapid deregulation and currently, both the lending and deposit rates\nare market determined. <\/p>\n\n\n\n

    Besides the overall economy is experiencing a liquidity crunch, thereby impacting the consumer sentiment and current GDP reflects the low demand. Current core CPI inflation for the month of June  has increased to 3.18%  (the recent figure shared by MOSPI<\/a>). To control the inflation the Reserve Bank has reduced policy rates by 75 bps so far in 2019. If the inflation rate actually moves up, it reduces the scope of further reduction in policy rates by the RBI to accommodate growth concerns.<\/p>\n\n\n\n

    Hence,\nthe actual yields of the Canara Robeco Overnight Scheme will vary in line with\ngeneral levels of interest rates and debt\/money market conditions prevailing\nfrom time to time. Canara Robeco Overnight Fund will be sensitive to systemic\nliquidity. Excess liquidity may drag the potential return down and vice-versa.<\/p>\n","protected":false},"excerpt":{"rendered":"

    Almost a year ago, Infrastructure Leasing & Financial Services (IL&FS) downgrading episode was reported. This pushed liquid funds and debt funds category under severe stress, soon similar corporates shared a similar fate. Owing to these cases, Debt Mutual Funds were drastically hit since several fund houses had been holding debt instruments issued by these downgraded corporates…<\/p>\n","protected":false},"author":4,"featured_media":726,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"cybocfi_hide_featured_image":""},"categories":[3],"tags":[],"_links":{"self":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts\/721"}],"collection":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/users\/4"}],"replies":[{"embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/comments?post=721"}],"version-history":[{"count":12,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts\/721\/revisions"}],"predecessor-version":[{"id":752,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/posts\/721\/revisions\/752"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/media\/726"}],"wp:attachment":[{"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/media?parent=721"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/categories?post=721"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/blog.certifiedfinancialguardian.com\/index.php\/wp-json\/wp\/v2\/tags?post=721"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}