Cash plans, popularly known as liquid funds, which are largely used by corporates and high networth individuals to park surplus cash, are gaining interest from retail participants, too.
According to the data on Association of Mutual Funds in India (AMFI), as on March 2017, the retail AUM of liquid funds stood at Rs 5,600 crore as against Rs 4,100 crore a year in March 2016, a rise of Rs 1700 crore or 43 percent.
It is considered as the least risk category in mutual funds, as it does not invest in long-term bonds, and thus does not get affected much by interest rate movements. Hence, it is used for cash management for a very short time-frame.
Fund managers also said that the instant redemption facility offered by mutual funds in liquid schemes is attracting retail investors.
AMFI data reveals that retail folios have also growth on year-on-year basis. Retail folios in liquid funds stood at 6.6 lakh in March 2017 compared to 2.76 lakh in March 2016. Retail investors constitute 85 percent of liquid fund folios; however, the assets held by them account for merely 2 percent of total liquid AUM of Rs 3.14 lakh crore.