Liquid Funds are debt funds that invest your money in very-short-term debt like treasury bills, call money and government securities. One of the main features of Liquid Funds is that they provide the investor with Capital Protection i.e. one of the primary objectives of the fund is to protect the investors capital. Liquid Funds provide Capital Protection by investing in very high-quality credit. These funds can invest in instruments carrying maturity up to 91 days. Liquid Funds are non-volatile and shift in their Net Asset Values (NAVs) occur due to changes in interest rates and not market volatility, this is due to the fact that the instruments they invest in are very-short-term and are not traded on the market.

Liquid Funds are a great investment in case you have had a sudden influx of income, as they can provide investors with higher interest rates than savings accounts. Liquid Funds are often invested in through a lump sum method, and then a Systematic Transfer Plan (STP) is used on them to invest in Equity Funds. These funds are a great way to invest your additional income and see better returns than most savings accounts as they provide better interest rates and very-low-risk. Liquid Funds do not carry Exit Loads. Our top 5 picks for Liquid Funds are below:

L&T Liquid Fund

The L&T Liquid Fund has consistently outperformed its benchmark and category since 2008. This fund’s strong performance and robust investment strategy have made it a favorite with short-term investors. The L&T Liquid Fund invests heavily in Commercial Paper and Certificates of Deposit rated A1+ and above, thereby, mitigating credit risks. The fund carries an Alpha of 1.56 which is marginally lower than the category average of 1.80, but it carries a significantly lower Beta of 0.40 when compared to its category average of 0.66, this indicates that the fund generates slightly lower risk-adjust-returns but significantly mitigates risk, providing investors with good capital protection. This fund is suitable for investors that have low-risk tolerance and seek reasonable, regular returns on their investments. The trailing returns of the L&T Liquid Fund against its category and benchmark have been provided in the table below:

Trailing Returns (%) 3-M 6-M 1-Y 3-Y 5-Y
Fund 1.86 3.71 7.48 7.23 7.79
CCIL T Bill Liquidity Weight 1.29 2.36 4.34 4.34 4.79
Category 1.79 3.28 6.95 6.92 7.58

ICICI Prudential Liquid Fund

The ICICI Prudential Liquid Fund was launched on November 17, 2005, by the ICICI Prudential Mutual Fund House. This fund has consistently outperformed its category and benchmark since 2007 making it one of the strongest Liquid Funds on the market. The fund saw its best performance between August 2011 and August 2012. The fund employs fundamental analysis focusing on macroeconomic conditions, including the political and economic environment and factors affecting liquidity to create its portfolio. The fund is managed by Mr. Rahul Goswami and Mr. Rohan Maru who carry rich experience in market research and fund management. The trailing returns of the ICICI Prudential Liquid Fund against its benchmark and category have been provided in the table below:

Trailing Returns (%) 3-M 6-M 1-Y 3-Y 5-Y
Fund 1.87 3.7 7.47 7.21 7.78
CCIL T Bill Liquidity Weight 1.29 2.36 4.34 4.34 4.79
Category 1.79 3.28 6.95 6.92 7.58

Reliance Liquid Fund

The Reliance Liquid Fund was launched on December 9th, 2003, and has since been a top performer in its category. The fund has consistently outperformed its category and benchmark since 2007. The Reliance Liquid Fund carries an Alpha of 1.67 and a Beta of 0.45, this demonstrates the fund’s capacity to produce marginally higher risk-adjusted-returns while greatly mitigating risk. The fund is managed by Ms. Anju Chhajer who managed 11 open-ended schemes for Reliance Mutual Funds. The Reliance Liquid Fund seeks to provide investors with optimal returns while mitigating risks. The fund provides its investors with superior liquidity by investing in debt and money market instruments. The trailing returns of the Reliance Liquid Fund against its benchmark and category have been provided in the table below:

Trailing Returns (%) 3-M 6-M 1-Y 3-Y 5-Y
Fund 1.88 3.75 7.52 7.24 7.8
CCIL T Bill Liquidity Weight 1.29 2.36 4.34 4.34 4.79
Category 1.79 3.28 6.95 6.92 7.58

Aditya Birla Sun Life Liquid Fund

The Aditya Birla Sun Life Liquid Fund was launched on June 16th, 1997 by the Aditya Birla Sun Life Mutual Fund House. The fund’s robust investment strategy allowed it to outperform its peers and benchmark since 2007. The Aditya Birla Sun Life Liquid Fund invests primarily in Commercial Paper rated A1+ or above. The fund also seeks to provide investors with superior returns by making nominal investments in AAA and AA bonds and debentures. The fund carries an Alpha of 1.61 and a Beta of 0.42. Even though the Alpha is marginally lower than the category average of 1.80, the Beta is lower than the category average of 0.66, this demonstrates the fund’s ability to provide investors with superior capital protection for slightly lower risk-adjusted-returns.

Trailing Returns (%) 3-M 6-M 1-Y 3-Y 5-Y
Fund 1.88 3.73 7.5 7.25 7.83
CCIL T Bill Liquidity Weight 1.29 2.36 4.34 4.34 4.79
Category 1.79 3.28 6.95 6.92 7.58

SBI Liquid Fund

The SBI Liquid Fund was launched on March 22nd, 2007 by the SBI Mutual Fund House. The fund’s returns since its launch have been 7.77%. Since 2010 the fund has consistently outperformed its benchmark and category due to its robust investment strategy. The SBI Liquid Fund invests heavily in Commercial Paper rated A1+ or above. The fund also invests in Treasury Bills to provide extra capital protection. The SBI Liquid Fund is managed by Mr. R. Arun since May 2018, Mr. R. Arun carries a total experience of 12 years in mutual funds. The training returns of the SBI Liquid Fund against its category and benchmark has been provided in the table below:

Trailing Returns (%) 3-M 6-M 1-Y 3-Y 5-Y
Fund 1.82 3.67 7.38 7.13 7.71
CCIL T Bill Liquidity Weight 1.29 2.36 4.34 4.34 4.79
Category 1.79 3.28 6.95 6.92 7.58
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