Earlier, JM Mutual Fund had also offered growth and dividend plans under its short-term debt fund. The growth plan, with its 90 per cent investments in debentures, has given an average return of around 13 per cent which is in line with other bond funds.

``We have filed the document with Sebi and hope to get the clearance soon. The scheme will target treasury managers and may be initially launched in select cities,'' said Niamatullah, head of SBI AMC. The minimum investment has been kept at Rs 10,000.

The two options available under Magnum Liquid are Liquid Growth and Liquid Cash Plan. Both plans willinvest their entire corpus in debt (corporate debentures and bonds), government securities and money market instruments. However, Plan B will focus on securities of shorter maturity and will not invest in debentures or bonds with maturities exceeding three years. On the other hand, the growth plan will invest in debt instruments of longer maturities as well as money market instruments.

While MMMFs and quasi-MMMFs had bifurcated the debt market, AMCs are now aiming at offering both short and long-term debt holdings under a single scheme. ``Such schemes, however, will have a limited market since only those investors, who anticipate interest rate movements and consequently, move from one plan to another will invest,'' said a debt market analyst.

In a falling interest rate scenario, the investors in Liquid Growth Plan will benefit from capital appreciation of underlying securities. Investors of Liquid Cash Plan will have the option of switching over to the growth plan at NAV-linked price and take advantage ofthe rise in NAV. In a rising interest rate scenario, the investor of growth plan will have the choice of switching to cash plan at NAV-related price.

The Cash Plan is aimed at investors who want to park their funds in shorter maturity instruments in expectation of rising interest rates. The Cash Plan will provide relatively higher liquidity and the returns will be linked to short-term interest rates. Both plans will declare separate daily NAVs.

Magnum Liquid will not charge any entry or exit load from initial investors and will not carry any lock-in period for the investment. The total recurring expenses will be charged at 1 per cent of the weekly average net asset value. Since the AMC is bearing the initial issue expenses, the entire initial corpus will be invested in the debt market.

The fund has the option of investing in overseas markets, as and when the Reserve Bank permits. The fund may also invest in hedging techniques like interest rate derivatives. This scheme, the second scheme after PNBMF'sopen-end debt scheme, is to seek permission for investment in derivatives.