Bajaj Finserv Mutual Fund makes a quiet debut, with two debt funds

The launch of fixed-income products by Bajaj Finserv AMC is the start of building its product suite. The company is set to launch equity and hybrid products soon.

Bajaj Finserv, India’s 43rd asset management company (AMC) and its fund house, has decided to debut with two debt funds -- a Liquid and an Overnight fund. These are two of the first seven schemes for which it had filed with the Securities and Exchange Board of India (Sebi).

Apart from these debt funds, Bajaj Finserv AMC has approvals to launch a money market fund, and three equity-oriented schemes -- a balanced advantage fund, large- and mid-cap fund and a flexi-cap fund – as well as an arbitrage fund.

The launch of fixed-income products by Bajaj Finserv AMC is the start of building its product suite. The company is set to launch equity and hybrid products soon.

“Mutual funds, as an industry, have been able to reach 3.75 crore unique investors. With new entrants, there is an opportunity to increase the reach in a broader market and enhance awareness,” said Harshad Chetanwala, co-founder of MyWealthGrowth.

What is on offer

The new fund offers (NFO) of Bajaj Finserv Overnight Fund and Bajaj Finserv Liquid Fund opened on June 29 and will close on July 4.

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Bajaj Finserv Liquid Fund is an open-ended scheme that invests in debt and money market instruments, with a maximum maturity of up to 91 days and is suitable for creating an emergency fund as it offers easy liquidity and quick redemption options.

The fund house is targeting Bajaj Finserv Overnight Fund to entrepreneurs and corporates which constantly need to park large sums of money for a short period until it can be deployed elsewhere. The scheme will invest in money market and debt instruments, with overnight maturity.

Both these debt funds are designed for retail, high net worth individuals and institutional investors, and will be available across 20,000 mutual fund distributors as well as the company’s digital channels.

“These categories are very homogenised. With our prudent risk management practices, we will always prioritise the safety of investments, followed by liquidity and returns,” said a senior fund house official who did not want to be quoted.

The funds will be managed by Siddharth Chaudhary, Senior Fund Manager-Fixed Income, Bajaj Finserv MF, and Nimesh Chandan, Chief Investment Officer, Bajaj Finserv MF.

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There are 37 liquid funds in the market now. This category, on an average, has delivered 6.13 percent returns on a one-year basis. Liquid schemes have relatively low interest rate risk and moderate credit risk.

Bajaj Finserv Liquid Fund will invest in Treasury Bills, Commercial Papers, Certificates of Deposit, repo and other cash equivalents and other money market instruments from issuers with high credit quality and with maturities of up to 91 days.

As far as overnight funds are concerned, there are 32 of them now, and, as a category, they have delivered an average return of 5.98 percent on a one-year basis.

Bajaj Finserv Overnight Fund will invest in overnight securities with relatively low interest rate risk and credit risk.

Why start with debt funds?

According to company sources, Bajaj Finserv will be launching a comprehensive set of products across fixed income, hybrid and equity categories. This is against the focused strategy followed by some of the recent entrants into the market.

While some are focusing primarily on passive funds, others appear to be focusing on equity-oriented funds at the moment.

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“To start with, we will launch a set of fixed income products and build up a base of assets under management. It can also act as a filler vehicle for retail investors to park funds with us and as STPs (systematic transfer plans) or to switch to equity products, which we intend to launch soon after,” a source said.

Typically, while equity funds bring in retail investors, debt funds like Bajaj Finserv Overnight Fund and Bajaj Finserv Liquid Fund bring in corporate investors and large volumes. A fund house needs both to grow its assets. These schemes are used by retail investors for STPs.

What should investors do?

According to experts, usually, new AMCs launch liquid or overnight funds to begin with. Bajaj Finserv AMC, too, is following the same approach.

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“These funds are more institutional products in which corporates and business houses park their short-term money. Having said that, even individual investors consider liquid funds from a near-term perspective. A lot depends on the reach-out strategy and a national player like Bajaj may get some advantage, considering its presence across different regions,” said Chetanwala.

For individuals looking to invest in this category, there are ample options available in the market to choose from. Further, retail investors should wait for the fund house’s performance to show before investing.