YES Liquid Fund- Worthy To Park Your Money For Short-Term?   Jan 08, 2019



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YES Bank has made its debut in Indian mutual fund industry through its business arm YES Mutual Fund with the approval from SEBI in June 2018. YES Liquid Fund is the first open-ended scheme launched by the fund house.

A liquid fund invests in debt & money market instruments with a maturity of upto 91 days only. They invest in money market instruments such as Certificate of Deposits (CDs), Commercial Papers, Term Deposits, Call Money, Treasury Bills and so on.

As per the mandate, YES Liquid Fund (YLF) will allocate all its assets in such instruments. The Scheme may undertake repo / reverse repo transactions in Corporate Debt Securities; Credit Default Swaps; Short Selling and such other transactions in accordance with guidelines issued by RBI and SEBI from time to time. Further, YLF may invest upto 50% of its net assets in derivatives as permitted by the guidelines by SEBI.

Liquid fund entails low risk, but are not absolutely safe. However, to park funds for the short-term, say a month to a year, they can be considered provided you are willing to assume some investment risk.

Table 1: NFO Details

Type An open-ended debt Category Liquid scheme
Investment Objective The investment objective of the Scheme is to generate optimal returns consistent with moderate levels of risk and high liquidity by investing in high-quality debt and money market instruments.

However, there is no assurance or guarantee that the investment objective of the Scheme will be achieved. The Scheme does not assure or guarantee any returns.
Min.Investment Rs 10,000 and in multiples of Re 1 thereafter Face Value Rs 10,000 per unit
Plans  • Direct
• Regular
Options

• Growth
• Dividend

  • Re-investment Facility
  • Pay-out Facility
Entry Load Not Applicable Exit Load Nil
Fund Manager Mr Piyush Baranwal Benchmark Index CRISIL Liquid Fund Index
Issue Opens January 02, 2019 Issue Closes: January 16, 2019
(Source: Scheme Information Document)

How will YES Liquid Fund allocate its assets?

Under normal circumstances, the scheme’s asset allocation pattern will be as under:

Table 2: YLF’s Asset Allocation

 
Instruments
Indicative allocations
(% of Total Assets)
Risk Profile
Minimum Maximum (Low/ Medium/ High)
Debt Instruments# and Money Market Instruments*with a maturity/residual maturity of up to 91 Days 0 100 Low to Medium

* Includes commercial papers, commercial bills, treasury bills, Government securities having an unexpired maturity up to one year, call or notice money, certificate of deposit, usance bills and any other like instruments as specified by the Reserve Bank of India from time to time.

#Debt Securities includes securitized debts and liquid schemes launched by SEBI registered Mutual Fund or schemes that invest predominantly in money market instruments/ securities.

Securitized debt cumulative allocation not to exceed 50% of the net assets of the Scheme.

The Scheme may invest upto 50% of its net assets in Derivatives.

(Source: Scheme Information Document)

What will be the Investment Strategy?

To achieve the investment objective of the Scheme, the Fund shall be managed to generate optimal returns consistent with low to moderate levels of risk and high liquidity by investing in high-quality debt and money market instruments.

The Scheme is positioned at the lowest level of the risk-return matrix, which will be the guiding line to make suitable investments with low risk. The Scheme will invest predominantly in money market securities with some allocation towards other debt securities to enhance the portfolio return.

The portfolio, for managing the liquidity will be structured using the matrix of asset liability management whereby maturity of the assets will seek to align with historical observed trends of liabilities. The Scheme will seek to generate reasonable return along with maintaining liquidity with the help of cash and cash equivalent instruments.

The fund management team will take an active view of the interest rate movement by keeping a close watch on various parameters of the Indian economy, as well as developments in global markets.

The investment team of the AMC will, as a mitigation and risk control procedure, will carry out rigorous credit evaluation of the issuer company proposed to be invested in. The credit evaluation will analyse the operating environment of the issuer, the sector analysis, business model, management, governance practices, quality of the financials, the past track record as well as the future prospects of the issuer and the financial health of the issuer.

YLF may also use derivative instruments like interest rate swaps, Overnight Indexed Swaps (OIS), forward rate agreements, interest rate futures (as and when permitted) or such other derivative instruments used for the purpose of hedging, and portfolio balancing or such other purpose as may be permitted under the regulations and guidelines from time to time.

Who will manage the YES Liquid Fund?

YES Liquid Fund will be managed by Mr Piyush Baranwal. He holds a Bachelor's degree in Engineering (B.E.), has a PGDM to his credit, and is a Chartered Financial Analyst (CFA).

Mr Baranwal holds over 10 years’ experience in portfolio management and trading in fixed income securities. Prior to joining, YES Mutual Fund in October 2018, Mr Baranwal has worked as an Investment Manager for 4.5 years with BOI AXA Investment Managers, before that with Morgan Stanley Investment Management for 4.5 years, and was a part of Principal PNB Asset Management from May 2008 to Jan 2011.

The outlook for YES Liquid Fund

The fortune of YLF will be hinged on the quality of debt papers and money market instruments it would hold in its portfolio. The proportion of Commercial Papers (an unsecured negotiable money market instrument issued by corporates, primary dealers and all India Financial Institutions as an alternative source of short-term borrowings) remains to be seen; because in the past, these instruments have negatively impacted liquid funds.

[Read: How the IL&FS Fiasco Put Money In Liquid Funds At Risk]

In addition, factors affecting the debt market such as the direction of policy rates and the consequent impact on yields, ratings assigned to papers held in the portfolio, etc. are some of the factors that could weigh on the potential performance of YLF even as the fund house has devised a risk mitigation strategy.

Hence, consider your risk appetite and time horizon before investing in YLF.

To read PersonalFN’s view click here.

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Author: Aditi Murkute
 


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