Liquid and Overnight Funds investors should note the regulatory changes, which will affect their investments. Investments must be for a minimum of 7 days and cut off time is advanced for purchase of units. Liquid fund returns will also move towards the RBI Repo Rate.
October 2019 onwards, SEBI has changed the risk management framework for liquid and overnight funds.
Mutual Funds will levy exit load on investors who exit the Liquid Fund within 7 days of their investment.It will be effective for all fresh investments from 20th October 2019 onwards. It is further clarified that exit load will not be applicable to any investments made in liquid funds prior to 20th October 2019. AMFI is advised to prescribe the minimum exit load in a liquid fund on a graded basis. The cut-off timings for applicability of Net Asset Value (NAV) in respect of the purchase of units in liquid and overnight funds shall be 1:30 p.m.
Liquid funds need to hold at least 20% of its net assets in liquid assets which includes Cash, Government Securities, T-bills and Repo on Government Securities.Liquid Funds and Overnight Funds are not allowed to park funds pending deployment in short term deposits of scheduled commercial banks also can not invest in debt securities having structured obligations and credit enhancements.