NFO alert: Shriram Liquid Fund, Franklin India Arbitrage Fund open for subscribers; check details before investing

New fund offering: Shriram Asset Management Company's latest offering Shriram Liquid Fund has opened for its subscribers. Shriram Liquid Fund is an open-ended liquid scheme and has a relatively low interest rate risk and moderate credit risk scheme.

The objective of the newly launched fund is to achieve favourable returns while maintaining relatively low to moderate risk levels and ensuring high liquidity through investments in debt and money market instruments. The fund will target an average maturity of no more than 91 days. Investors are advised that the new fund offering (NFO) will cease accepting investments on November 8, 2024.

Investment Options

> Investors can regularly invest in the Shriram Liquid Fund to meet their short term financial and familygoals while maximising their returns on their idle funds.

> The fund offers the investor the benefit of a convenient avenue to park surplus cash for the short term with an aim to earn moderate level of return with relatively lower risk.

> Along with the existing Shriram Overnight Fund and the recently launched Shriram Nifty 1D Rate Liquid ETF (LIQUIDSHRI), the introduction of Shriram Liquid Fund will complete the set of shorter duration debt solutions for investors.

> The minimum investment amount for lumpsum or SIP is Rs 1000. 
> There is graded exit load up to six days and no exit load from the 7th day. 
> Investors can also set up a Systematic Transfer Plan (STP) to allocate funds from Shriram Liquid Fund to other Shriram funds, especially in volatile markets.

Investment approach

The fund will focus on investing in A1+ rated instruments and prioritise stability and liquidity, while also striving to achieve an optimal balance of Returns through a systematic investment approach. This will be accomplished by diversifying investments across sectors and selecting securities with the highest possible historical ratings and stable outlook. 

A mix of debt securities including Certificates of Deposit, Commercial Papers, T-bills, Government securities, and money market NCDs will be utilized to ensure low volatility and safety. The portfolio construction will be driven by research, taking into consideration interest rate cycles, credit evaluation, and credit cycles with a robust approach.

“Shriram Liquid Fund aligns with our mission to offer solutions that enhance financial flexibility for investors. The fund's value proposition is anchored around the SLR approach, which offers a balanced mix of Stability, Liquidity and Returns potential, making it an ideal option for both retail and corporate investors. This fund could be helpful for retail investors in earning better returns than saving accounts on their idle cash, as well as for corporates for their cash management purposes as the scheme would provide liquidity with low volatility. It is also an ideal choice for investors looking to maintain contingency funds securely and efficiently. With this new product, we continue to expand our portfolio to meet the evolving needs of our customers, ensuring they have access to reliable, research-backed investment options that help achieve their financial goals,” said Kartik L Jain, MD & CEO, Shriram Asset Management Company Limited.

“Shriram Liquid Fund is designed for investors seeking income over the short-term providing a balance between Stability, Liquidity, and Returns by investing in the highest-grade instruments. The fund will maintain a staggered portfolio allocation and accrual strategy with 75% to 80% investments in CDs and CPs. Its model allocation would be 5% to overnight papers, 25% in Certificates of Deposits, 50% in Commercial Papers, and 20% in T-bills, and will be in line with the Asset allocation pattern mentioned in the Scheme Information document,” said Sudip More, Fund Manager, Shriram AMC.

Franklin India Arbitrage Fund

Franklin Templeton Mutual Fund has introduced the Franklin India Arbitrage Fund, designed to leverage arbitrage opportunities in both the cash and derivative segments of the equity market. The fund's initial offering period will conclude on November 18, with continuous sales and repurchases beginning on November 21. This new fund is an open-ended hybrid scheme centered on arbitrage, with an active investment strategy that adapts to market conditions. 

By capitalising on the cost differentials between cash and derivatives markets, the fund aims to generate potential returns for investors. Additionally, investing in arbitrage funds for more than a year can lead to lower capital gains tax rates, providing a tax-efficient investment option for interested parties.

Arbitrage funds are mutual funds that aim to capitalize on price variations in derivatives and cash markets by executing simultaneous buy and sell transactions in cash and futures markets.

“Arbitrage funds in India are ideal for investors seeking short-term income generation without exposing their investments to high risk,” said Avinash Satwalekar, president, Franklin Templeton–India.

Key details

Scheme Objective: The scheme aims to achieve capital appreciation and income by primarily seeking arbitrage opportunities in the cash and derivative segments of equity markets, as well as within the derivative segment. The remaining funds will be invested in debt and money market instruments. Please note that the scheme's investment objective is not guaranteed.

Benchmark: The performance of the fund will be measured against the Nifty 50 Arbitrage Index.

Investment Strategy: The fund will invest at least 65% of its assets in equity and equity-related securities, while the remaining 35% may be allocated to debt, money market instruments, cash, and cash equivalents. The scheme aims to take advantage of arbitrage opportunities in the spot and futures prices of exchange-traded equities, as well as in the derivatives segment. If the Fund Manager believes that arbitrage opportunities are limited, the scheme may also invest in short-term debt and money market securities.

Minimum Investment: The minimum investment amount for lumpsum investment is Rs 5,000, and for SIP is Rs 500.