All you need to know about Bajaj Finserv Overnight Fund

The Bajaj Finserv Overnight Fund is a debt fund managed by Bajaj Finserv Asset Management Limited. The scheme aims to provide reasonable returns commensurate with low risk and a high level of liquidity through investments made primarily in overnight securities having a maturity of 1 business day. However, there is no assurance that the investment objective of the Scheme will be achieved.

• Table of contents

1. What is Bajaj Finserv Overnight Fund?
2. Suitability of overnight funds
3. Features of Bajaj Finserv Overnight Fund
4. Potential benefits of investing in Bajaj Finserv Overnight Fund
5. Who should invest in this scheme?
6. Why consider the Bajaj Finserv Overnight Fund?
7. How to invest in Bajaj Finserv Overnight Fund?

What is Bajaj Finserv Overnight Fund?

The Bajaj Finserv Overnight Fund is a debt fund that invests in debt and money market instruments with overnight or near-overnight maturities. This includes TREPS, Repo/Reverse Repo in Government securities, treasury bills, commercial papers, certificates of deposit, and government securities. The weighted average maturity of the portfolio is maintained at one day, ensuring highly liquid investments.

Moreover, the Bajaj Finserv Overnight Fund does not take credit risk and limits its exposures only to highest rated instruments. This conservative strategy aims to provide relative stability of investments and regular income.

Suitability of overnight funds

Overnight funds are the most liquid debt funds as they allow instant access to money without any lock-in period. They are suitable for parking funds for a very short duration until the money is required. Some common use cases are:

• Emergency funds: One can invest their emergency corpus in overnight funds with the aim to earn returns than a savings account, while ensuring instant liquidity if the need arises. While returns of savings account tend to be fixed, returns from Overnight Funds are subject to market movement.
• Investment opportunities: Funds waiting to be deployed for a few days can be invested to earn marginal returns instead of lying idle in a bank account.
• Short-term parking of funds: Investors who have to pay fees, bills or taxes shortly can use an overnight fund to generate some income during the waiting period.

However, an overnight fund is not suitable for long-term wealth creation due to its extremely conservative profile. Only surplus short-term cash balances which are not needed for more than a couple of weeks should be invested.

Features of Bajaj Finserv Overnight Fund

Some key features of the Bajaj Finserv Overnight Fund include:

• No lock-in period: Investments can be redeemed anytime without any notice period.
• High liquidity: At least 95% of assets are invested in instruments with overnight maturity to ensure same-day liquidity.
• Low risk: Focuses only on the highest rated debt instruments to maintain relative capital stability.

Potential benefits of investing in Bajaj Finserv Overnight Fund

• High liquidity: Overnight funds ensure very high levels of liquidity by maintaining at least 95% of the portfolio in overnight maturity instruments like treasury bills or commercial papers. This allows investors to redeem their money instantly without any notice period requirement or exit loads. Such on-demand liquidity makes overnight funds suitable for short-term cash balances that may be needed urgently.
• Marginal returns over savings bank: While overnight funds only aim to offer nominal returns, they have historically delivered marginally superior yields compared to savings bank interest rates after factoring in tax benefits. However, returns of savings account tend to be fixed as compared to Overnight Fund that will be subject to market movement.
• Less impact on capital: Overnight funds generally have the option to invest up to 100% in highest credit rated money market instruments with one business day maturity. The ultra-short duration ensures that the debt papers purchased do not fluctuate much in value if interest rates change suddenly. This makes capital erosion due to defaults or interest rate risks highly unlikely.

Who should invest in this scheme?

The scheme provides an investment avenue for investors looking for a short-term parking place for their funds. By investing in debt and money market instruments that mature overnight, the fund strives to achieve a balance between relative stability and liquidity. The fund manager may also invest in liquid funds or overnight mutual fund schemes if suitable debt instruments are not available or do not present favorable risk-reward conditions.

The Bajaj Finserv Overnight Fund is most suitable for investors who seek to invest their surplus funds with an investment horizon of just one day. This fund can also be suitable for corporate treasuries and retail investors with idle money. Additionally, those looking for an alternative to keeping cash in savings accounts with relatively low-interest earnings can consider this scheme.

Why consider the Bajaj Finserv Overnight Fund?

Investing in the Bajaj Finserv Overnight Fund can be a wise choice for several reasons, each catering to different aspects of an investor's needs:

• Relative stability: One of the primary reasons to consider the Bajaj Finserv Overnight Fund is the relative stability of capital. Since the fund invests in securities that mature in one day, it effectively minimizes market risk. This makes it a relatively stable investment option compared to other mutual fund categories. For investors who are risk-averse or looking to balance out the riskier components of their portfolio, this fund can serve as a reliable choice.
• Potentially consistent returns: While the returns on overnight funds might not be as high as long-term equity investments, they offer relative stability. This is crucial for investors who need predictable income. The fund aims to provide consistent returns, preserving the principal amount while still yielding some income.
• High liquidity: Liquidity is a significant factor in any investment, and the Bajaj Finserv Overnight Fund scores high in this regard. The ability to quickly and easily convert your investment into cash without significant loss of value is a key advantage, especially in emergency situations.
• Convenience and flexibility: The fund offers a convenient and flexible investment option. Investors can choose to invest a lumpsum or set up a systematic investment plan (SIP) to invest regularly. The ease of entry and exit from the fund without any lock-in period or significant exit loads makes it a hassle-free option.
• Suitability for short-term goals: For investors with short-term financial goals or those who prefer to park their surplus funds for short periods, the Bajaj Finserv Overnight Fund can be an ideal choice. It usually offers potentially better returns than traditional savings accounts or fixed deposits for similar short durations, without compromising on the stability of the capital.
• Professional management: The fund is managed by experienced professionals from Bajaj Finserv Asset Management Ltd., who are adept at monitoring market conditions and making informed investment decisions for the best possible return potential.

How to invest in Bajaj Finserv Overnight Fund?

Step 1: Research and understanding

Before investing, it's crucial to understand the specifics of the Bajaj Finserv Overnight Fund, managed by Bajaj Finserv Asset Management Ltd. This includes the fund's investment strategy, past performance, and associated fees.

Step 2: Eligibility and documentation

Ensure you meet the eligibility criteria and have the necessary documents ready, such as identity proof, address proof, and bank details. Make sure that the Know Your Customer (KYC) formalities are up to date.

Step 3: Registration

Visit the official website of Bajaj Finserv Mutual Fund or a trusted financial platform. Register and create an investment account. If you are already registered, you can log in with your credentials.

Step 4: Investment process

Navigate to the Bajaj Finserv Overnight Fund section. Decide the amount you wish to invest and choose between a lump sum or systematic investment plan (SIP). Next, fund your investment through any of the listed payment methods. When the investment is successfully funded, you will receive an acknowledgement.

Step 5: Monitoring and review

Regularly monitor the performance of your investment and review it in relation to your financial goals.

Conclusion

The Bajaj Finserv Overnight Fund can be a suitable investment option for parking temporary idle cash balances and generating marginal returns superior to a savings bank account at a risk higher than savings account. Investors looking for limited impact on capital with nominal returns over a very short-term should consider this fund for their investment portfolio. However, it is not meant for long-term wealth creation due to a conservative nature. Always remember to consult a financial advisor when in doubt about any investment decisions.

FAQs:

What is an overnight fund?

An overnight fund is a mutual fund that invests in securities with a maturity of one day, offering low risk and high liquidity.

How does the Bajaj Finserv Overnight Fund work?

The fund invests in overnight securities, ensuring relative stability and providing returns over a short period.

Who should invest in the Bajaj Finserv Overnight Fund?

It's suitable for conservative investors or those looking for a short-term, low-risk investment.

Is the Bajaj Finserv Overnight Fund suitable for all investors?

It is most suitable for investors looking for short-term avenues to park their funds with easy access to liquidity.

Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.
This document should not be treated as an endorsement of the views/opinions or as investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purposes only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals, and horizon. This information is subject to change without any prior notice.