Aditya Birla Sun Life Overnight Mutual Fund – Should you Invest?

Aditya Birla Sun Life Overnight Mutual Fund - Should you InvestAditya Birla Sun Life Overnight Mutual Fund Review


In current volatility, many investors are exiting from mutual funds and stocks and holding cash to invest at the right time. Even debt funds have turned to be risky after IL&FS Crisis. In this situation where you might be looking for safety, investing in Overnight Mutual Fund Schemes could be the best option. Aditya Birla Sun Life is launching a new Overnight mutual fund scheme. What are Overnight Mutual Fund Schemes? Should you invest in the Aditya Birla Sun Life Overnight Fund? What are the risk factors an investor need to consider before investing in this Aditya Birla Sun Life Overnight Fund New Fund Offer (NFO)?

Also Read: Top Performing Smallcap Funds in bull and bear phase

What are Overnight Mutual Fund Schemes?


Overnight mutual fund schemes invest in debt instruments which invests in overnight securities. It typically invests in bonds that mature in 1 day. Typically the portfolio would change every day. These overnight mutual fund’s invest in bonds of Collateralized Borrowing and Lending Obligation (CBLO). This is run from Clearing Corporation of India (CCI). Overnight mutual fund schemes are well explained by Mr. Pattabiraman on freefincal here.

Features of Aditya Birla Sun Life Overnight Fund


This is an open-ended mutual fund equity scheme.

This fund invests in debt instruments that matures overnight. Typically the debt instrument would mature in one day.

This scheme would open for subscription on 30th October, 2018

This scheme would close for subscription on 1st November, 2018.

Since this is an open ended scheme, it would again open for subscription after 5 business days from the date of allotment of Mf units after the NFO period.

This scheme is available in both regular and direct plans.

This plan offers both growth option and dividend option.

This scheme offers various dividend options like daily dividend option, weekly dividend option and monthly dividend.

This scheme is available for lump sum. Generally, no one would invest in SIP in such schemes.

Minimum investment is Rs 1,000 and in multiples of Rs 1 there-off for lump sum investments.

The NAV of the NFO is Rs 10 per unit now during initial subscription.

There is no entry load to invest in this mutual fund scheme.

There is no exit load to invest in this mutual fund scheme.

This scheme is classified as low risk scheme.

This scheme benchmark is  CIBIL CBLO Index.

Scheme total expense ratio (TER) is estimated up to 2.55% of the total assets on any day.

Who is the Fund Manager of Aditya Birla Sun Life Overnight Fund NFO?


The Fund Manager is Mr. Kaustabh Gupta

What is the investment objective and strategy of this Aditya Birla Sun Life Overnight Fund?


To generate reasonable income through investments in debt securities, money market instruments & CBLO having a maturity of 1 day.

The Scheme does not guarantee/indicate any returns. There can be no assurance that the scheme’s objectives will be achieved.

What is the allocation pattern in this mutual fund scheme?


This fund investment pattern looks as follows:

It invests upto 100% in Debt Securities and Money Market Instruments with maturity, up to 1 day only & CBLO

Can NRI invest in this MF scheme?


Yes, they can invest in this scheme. They can invest on repatriation or non repatriation basis.

What are the risks involved in this fund?


One should consider some of these risk factors before investing.

1) One should consider interest risk. Fixed income securities such as bonds, debentures and money market instruments run price-risk or interest-rate risk. Generally, when interest rates rise, prices of existing fixed income securities fall and when interest rates drop, such prices increase. The extent of fall or rise in the prices is a function of the existing coupon, days to maturity and the increase or decrease in the level of interest rates.

2) Investors need to understand the credit risk in this scheme. In simple terms, this risk means that the issuer of a debenture/ bond or a money market instrument may default on interest payment or even paying back the principal amount on maturity. Even where no default occurs, the price of a security may go down because the credit rating of an issuer goes down. It must, however, be noted that where the Scheme has invested in Government securities, there is no credit risk to that extent.

3) One should look into Liquidity / Marketability Risk. This refers to the ease with which a security can be sold at or near to its valuation yield-to-maturity (YTM). The primary measure of liquidity risk is  the spread between the bid price and the offer price quoted by a dealer. Liquidity risk is today’s characteristic of the Indian fixed income market.

4) Like any other mutual fund scheme, investing in this fund does not guarantee any returns.

You may like: 15 Best Mutual Fund Schemes to invest in India

How is the Performance of the existing Overnight Mutual Fund Schemes?


Currently there are existing overnight mutual fund schemes. Let us look at their performance.

1) SBI Overnight Fund gave 1.5% returns in the last 3 months and 6% returns in the last 1 year.

2) HDFC Overnight Fund gave 1.5% returns in the last 3 months and 6% returns in the last 1 year.

3) L&T Cash Fund gave 1.3% returns in the last 3 months and 5.45% returns in the last 1 year.

4) UTI Overnight Fund gave 1.59% returns in the last 3 months and 5% returns in the last 1 year.

Should you invest in the Aditya Birla Sun Life Overnight Fund?


Many of us keep investing large corpus in fixed deposits to utilize for short term requirements and get small %age of returns. It could be for an emergency fund or to pay off down payment for buying a home or car or to take opportunities in the stock market etc., The purpose could be anything. You may have a large cap corpus, but you don’t need the money in one shot. You may need to withdraw partially at intervals. Safety is high important for you. Overnight funds are considered as relatively safe compared to liquid funds.  In such scenarios, investing in overnight funds could be useful.

Aditya Birla Sun Life Overnight Fund NFO details can be downloaded from here.

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Suresh

Aditya Birla Sun Life Overnight Fund NFO – Should you invest

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