PGIM India Money Market Fund NFO – Should you invest?

PGIM India Money Market Fund NFO Review

PGIM India is launching Money Market Fund NFO that would open for subscription on 28th February, 2020. PGIM India Money Market Fund aims to invest in money market instruments and is categorized as moderate low risk scheme. While investors are scared about debt mutual funds, this fund would invest in government securities, treasury bills issued by RBI and top rated commercial papers from corporate, hence it is a relatively safe investment option. What are Money Market Funds all about?   Should you invest in the PGIM India Money Market Fund NFO or avoid?

Also Read: Top Performing Debt Funds to invest in 2020

What are Money Market Mutual Funds?

Money market mutual fund invests in money market instruments like treasury bills, government securities, commercial papers, commercial bills issued by RBI etc. that have a maturity period up to 1 year. These funds would fall under debt mutual funds segment.

PGIM India Money Market Fund NFO – Issue Details

This is an open-ended mutual fund equity scheme.

This scheme would open for subscription on 28th January, 2020.

This scheme would close for subscription on 5th March, 2020.

Since this is an open ended scheme, it would again open for subscription after allotment of MF units after the NFO period after 5 working days.

This scheme is available in both regular and direct plans.

This plan offers both growth option and dividend option.

This scheme is available for lump sum and SIP investment.

Minimum investment is Rs 5,000 and in multiples of Rs 1 there-off for lump sum investments.

Minimum investment is Rs 2,000 per month for monthly SIP and for a tenure of 6 months.

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 fund.

This scheme is classified as moderately low risk scheme.

Scheme total expense ratio (TER) is estimated at a maximum of 2% of the total assets on any day.

PGIM India Money Market Fund NFO details can be downloaded here

Who is eligible to invest in this new mutual fund scheme?

The following is eligible to invest in this new fund.

1) Resident individuals, either singly or jointly.

2) Minors through Parents/ Legal Guardian.

3) Hindu Undivided Family (HUF) through its Karta.

4) Partnership Firms in the name of any one of the partners.

5) Proprietorship in the name of the sole proprietor.

6) Companies, Body Corporate, Societies, Association of Persons, Body of Individuals, Clubs and Public Sector Undertakings registered in India if authorized and permitted to invest under applicable laws and regulations.

7) Banks

Complete list of eligible participants who can invest can be checked in prospectus of this new fund offer.

Who is the Fund Manager of PGIM India Money Market Fund NFO?

The Fund Manager is Mr. Kumaresan Ramakrishnan.

What is the benchmark for this scheme?

The benchmark for this scheme is CRISIL Money Market Index.

What is the investment objective and strategy of this PGIM India Money Market Fund NFO?

The mutual fund aims to deliver reasonable market related returns through investments in Money Market instruments.

However, there is no assurance that the investment objective of the Scheme will be realized and the scheme does not assure or guarantee any returns.

What is the allocation pattern in this mutual fund scheme?

This fund investment pattern is as follows:

1) It invests 0% to 100% in money market instruments. The risk profile in this segment is Low.

2) Money market instruments referred here 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.

Can NRI invest in this MF scheme?

Yes, they can invest in this scheme. They can invest on repatriation or non repatriation basis. However, Resident of Canada, US persons and OCBs cannot invest in this scheme.

Why should you invest in PGIM India Money Market Fund NFO?

1) This money market fund invests in government securities and treasury bills issued by RBI. It also invests in top rated commercial papers / bonds of corporates.  Such investments would make these mutual funds as a relatively safe investment option.

2) These funds invests in commercial papers and government securities and provide fixed income ranging between 5% to 8%. Hence, one can estimate the fixed returns these funds can provide in short term to long term.

Major risk factors you should consider before investing in such funds

One should consider some of these risk factors / negative factors before investing.

1) Since this fund invests in fixed investment options, there is interest rate risk. The market value of fixed income securities is generally inversely related to interest rate movement. Accordingly, value of a portfolio of the scheme may fall if the market interest rate rise and may appreciate when the market interest rate comes down.

2) It invests in commercial papers of corporates in India. There could be delays in repayment of commercial papers or interest thereon. There could be downgrading of their credit ratings too.

3) There are credit risk, liquidity risks, spread risk, counter party risks involved in investing in such debt instruments.

4) Investors should not assume any guaranteed returns from money market MF schemes.

5) Since it is a new mutual fund scheme, there is no past performance, hence we would know how the fund would perform in the future.

How is the Performance of Money Market Mutual Funds in India?

Currently there are several money market mutual fund schemes in the market. Let us quickly see how these funds have performed in the last 6 months to 3 year period.

1) Money Market mutual fund schemes gave 7.5% to 8.2% annualized returns in the last 1 to 3 years. Even in the short term of 6 months, these funds gave 3.3% to 5.1% returns.

2) Franklin India Savings Fund and L&T Money market fund are the best performing money market mutual funds among the top 5 funds in the last 1 to 3 years.

Here are the performance top money market mutual fund schemes.

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You may like: Best Short Term Debt Mutual funds in India

Should you invest in the PGIM India Money Market Fund NFO?

Money market mutual fund invests in government securities, treasury bills issued by RBI and top rated commercial papers issued by corporates. Hence, these are relatively safer investment options. If you want to invest in safe investment options and get higher returns compared to traditional bank FDs, you can consider investing in this money market mutual fund scheme. However, investing in such new fund would be like testing a mutual fund scheme in this category. Alternatively, you can invest in existing money market funds which performed well in various market cycles.

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Suresh KP

PGIM India Money Market Fund NFO Review

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