NEW DELHI, Aug 20: Tata Mutual Fund shortly plans to launch an open-end, high liquidity scheme. Christened Tata Liquid Fund, it will be the ninth short-term debt fund after Birla Asset Management set the trend in June last year with the launch of Birla Cash Plus.A no-load scheme, Tata Liquid Fund will initially be launched only in Mumbai and later extended to other centres, at the discretion of the trustee company. The initial offer period is likely to be open for a period of three days. Tata Liquid will be the seventh fund from Tata Asset Management Company. The AMC currently manages three open-end and three closed-end schemes.
Tata AMC will put on offer a minimum of 10 lakh units at par, aggregating Rs 1 crore. The minimum investment amount is Rs 50,000 and in multiples of Rs 10,000 thereof. The scheme will invest 100 per cent of the funds in high-yielding debentures and money market instruments. The fund is likely to invest around 40 per cent in listed debt, 20 per cent in unlisted debt and the remaining in money market securities. Since the initial expenses will be borne by the AMC, the entire amount will be available to the scheme for investment in the debt and money markets. The AMC has estimated initial offering expenses at 4 per cent of the funds mobilised. The annual recurring expenses, except the investment management fee, will be borne by the AMC.
Annual recurring expenses has ben estimated at 0.55 per cent. The investment management fee will be 2.25 per cent of the weekly average net assets for net assets upto Rs 100 crore and 2 per cent of the balance net assets above Rs 100 crore.
The scheme will open for fresh sale and repurchase of units after seven business days from the date of closure of initial offer. The AMC will provide for full-disclosure of the portfolio on a semi-annual basis. A quasi-money market mutual fund, investments in the fund will not carry the mandatory lock-in of 14 days, as in the case of MMMFs. According to the offer document filed with the Securities and Exchange Board of India (Sebi), the fund will emphasise on securities with shorter maturities, given the lack of depth in the domestic debt and money markets. The scheme will be managed in such a way so as to maintain a rupee-weighted average maturity of six months with a portfolio turnover of around 80 per cent.
Short-term debt funds have caught the fancy of AMCs after Birla AMC launched its quasi-MMMF last year to veer around the mandatory lock-in of 30 days (applicable then). These funds invest in papers with short-term maturity with the advantage of instant liquidity and compete with bank deposits of shorter duration and MMMFs. The AMCs which have so far launched short-term debt funds are Reliance, JM, Templeton, DSP-Merrill Lynch, ICICI-Prudential, Kothari, Birla and Alliance. Since these funds do not have a broad-based investment horizon, the returns donot differ much.
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