1. What are Liquid Funds?
Liquid funds come under the category of debt schemes offered by Mutual Funds. The basic objective of a liquid fund is to manage the short term cash surplus of investors and provide optimal returns with moderate levels of risk and high liquidity. Liquid Funds generate income primarily through interest accrual by investing in money market instruments like Commercial Papers, Certificate of Deposits, CBLO/ Repos and in short term debt instruments of corporates and NBFCs.
Advantages
Liquid funds are ideal tools for managing surplus cash.
The liquidity is very high – redemptions can be available on a next day (T+1 business day) basis.
Liquid funds can deliver better yields than savings and fixed deposits. Liquid funds offers returns comparable to fixed deposits and retains the liquidity of savings accounts
You can invest in liquid funds even for a day. Individuals can sweep their monthly salary into a liquid fund and then keep redeeming to meet the usual expenses. Often, savings accounts earn only a miniscule amount of interest. Money can be put to better use by investing in a liquid fund
2. What are the specific advantages of Quantum Liquid Fund?
Quantum liquid fund charges NO entry or exit loads.
The fund house follows a direct-to-investor approach and does not use distribution channels. There are no distribution commissions resulting in lower costs to the investor – Quantum Liquid fund charges a maximum expense ratio of 0.45% p.a.
The market risk is lower. In the Quantum Liquid Fund, the proportion of assets which can move according to market movements (Mark-to-Market component) is restricted to 10.0% of the schemes assets. This reduces the volatility in NAV and ensures stable performance. (Market risk refers to the risk that the value of investment would decrease due to movements in market factors.)
Lower Credit Risk. The Quantum Liquid Fund invests a minimum of 80.0% of its assets in instruments which are rated as AAA or equivalents (indicating highest safety of timely payment of interest and principal) by a SEBI registered credit rating agency. This reduces the credit risk involved. (Credit risk refers to the risk of loss due to default by a debtor/borrower)
Quantum Liquid Fund also follows a disciplined research and investment process to unearth the most favourable investments to optimize the returns
3. Who can invest in Liquid Funds?
Almost anyone can invest in liquid funds.
Corporates, HUFs, partnership firms, trusts and educational institutions with surplus cash in their current accounts have found liquid funds an ideal way to optimize their returns without sacrificing liquidity.
Individuals with surplus cash in their savings accounts can also use liquid funds effectively - sweep in excess salary income into a liquid fund and redeem it as and when required. (To know more about why liquid funds may be a better option to savings accounts, please read our article ‘Are you leaving your money idle in a savings account?').
NRIs (except those from Canada and the USA) and FIIs can also invest in liquid funds.
4. What is the asset allocation pattern of the Quantum Liquid Fund?
Under normal circumstances, the asset allocation shall be as follows:
Instrument
Allocation (as % of Net Assets)
Risk Profile
Money Market and other short term debt instruments having maximum repricing tenor of one year
100% (Out of which mark to market component of the scheme’s net assets on a weekly average basis will be less than 10%)
Low to medium
The above asset allocation is only indicative and may change from time to time, keeping in view the market conditions and applicable rules and regulations.
6. What are the different plans / options available to investors? What are the minimum subscription amounts for each?
Quantum Liquid Fund offers three variants to investors –
Growth Plan – requiring a minimum investment of Rs 10,000.00 and additional investments in multiples of Rs. 1,000/-
The accruals would be added to the NAV. So, over a period of time, the NAV of the growth plan would increase.
Monthly Dividend Payout Plan – also requiring a minimum investment of Rs 10,000.00 and additional investments in multiples of Rs. 1,000/-
The accruals would add on to the NAV during the month. Once a month, the dividend is declared and paid out.
Daily-Dividend Re-investment plan – requiring a minimum investment of Rs 1,00,000.00 and additional investments in multiples of Rs. 1,000/-
The dividend declared would be reinvested (net of dividend distribution tax) daily. Thus, the number of units held by an investor would increase and the NAV would remain at Rs. 10.
7. What are the taxation aspects of liquid funds?
a) Growth schemes of Liquid Funds are taxed as follows -
Short Term Capital Gains (profits realised on a holding period of under one year) –
Indian Nationals - It is added to your taxable income and taxed at your marginal rate of tax
NRIs - taxed at 30.0% plus applicable surcharge and cess
Long Term Capital Gains (profits realised on a holding period of over one year) –
Indian Nationals - Taxed @ 20.0% with indexation and @ 10.0% without indexation (surcharge and education cess applicable)
NRIs - Taxed @ 20.0% plus surcharge and education cess (cost indexation benefit is not available to NRIs)
Tax Working For Individuals
Tax Treatment for 1 Year Investment
Savings Deposits
Fixed Deposits
Quantum Liquid Fund (Growth Plan)
Assumed Annualized Interest Rate/Yield
3.50%
8.00%
8.00%
Tax Rate
33.99%*
33.99%
22.66%+
Annualized Net Post Tax Return
2.31%
5.28%
7.32%
( *Assumed at the highest Tax plan; + Long Term Capital Gains with indexation – at 20.0% + Surcharge + education cess; Inflation assumed at 5.0%.)
b) Dividend plans are taxed as follows:
Indian Nationals - Returns from dividend plans are tax free in the hands of investor but the fund pays a Dividend Distribution tax (DDT) @ 25.0% plus surcharge and education cess (effective rate at 22.06%) as per the current IT rules.
NRIs - all applicable taxes would be deducted at source (TDS) and the net redemption proceeds would be credited to your bank account. From the taxation perspective, dividend re-investment plan are the most tax efficient for NRIs.
Tax Working For Individuals – 3 month investment
Tax Treatment for 3 Month Investment
Savings Deposits
Fixed Deposits
Quantum Liquid Fund (Dividend Plan)
Assumed Annualized Interest Rate/Yield
3.50%
7.5%
7.5%
Tax Rate
33.99%*
33.99%
22.06%+
Annualized Net Post Tax Return
2.31%
4.95%
5.85%
( *Assumed at the highest Tax plan; + Effective Dividend distribution tax paid by the fund.)
a) Investing Offline/ Physical way
First time investors in the Quantum Liquid Fund can download the Application form, complete it and send it to any of the collection centres along with the cheque / demand draft of the requisite amount.
In line with the SEBI regulations, investors are also required to send an attested copy of their PAN cards (in the case of joint investors, PAN cards of all investors have to be included) and a copy of their KYC acknowledgement letter / MIN acknowledgement letter.
That is it. Simple and quick.
PAN cards can be attested by any judicial authority, bank manager, ARN distributor, notary public or gazetted officer. NRIs can get their PAN cards attested by a local bank manager or from the Indian consulate of their country of residence. Attestations by notary or judicial authorities of that jurisdiction are also accepted.
Presently, it is mandatory for all applications for subscriptions of value of Rs. 50,000/- and above to obtain a KYC compliance letter from the specified Points of Service of CDSL Ventures Limited. To know more about applying for KYC compliance, please click here.
b) Investing Online
We also offer an online investing option. Investors can invest at any time at their convenience on the internet.
First time users can click on the link to create your user ID
Once you have created your user id and set your password, please send an attested copy of your PAN card along with your user ID and contact number to the Karvy Hyderabad office. (You can also send it to us or the nearest collection centre. Sending it to Karvy, Hyderabad will help cut down the process time)
Within 24 hours of receipt at the Karvy Hyderabad office, your account will be activated and you will receive an email stating the same.
Once your account is activated, you can start investing online. We currently have banking relationships with HDFC Bank, ICICI Bank, Axis bank and IDBI Bank.
Owing to the current regulations, we require to have a signed copy of your application. So, after your online account is created, do log on. The first time you invest online, please take a print out of the application form, sign it and send it to us or your nearest collection centre.
Within 10 business days of your first transaction, you will be intimated of your account folio number. On receipt of the folio number, please complete the PIN agreement and send it to us.
This is a one time process. Once we receive the PIN agreement, you can make new investments, redeem your investments and even switch between our schemes online.
Of course, we will always be there to aid you in the process and address any doubts or queries you may have.
In case of any information on investing, please do contact our investor service helpdesk on our toll free number 1800-22-3863 (BSNL/MTNL phones) or on 022-2282 9414. We can also be reached at Info@QuantumAMC.com
9. What are the applicable timelines of subscription and redemption in the Quantum Liquid Fund?
Subscription – If a valid application form is received and time-stamped before 12 noon on any business day and the funds are available for utilization, the investor will be allotted units at the NAV of the previous day. If it is received and time-stamped after 12 noon, he will receive the NAV of the same day.
Redemption – If a valid redemption request is received and time-stamped before 3 p.m. on any business day, the investor will receive the proceeds at the NAV of the same day. If it is received and time-stamped after 3 p.m., the NAV considered will be of the next day.
10. How long will it take to transfer the amount to my account on redemption?
Under normal circumstances, if a valid application request is received before 3 p.m. on a business day (T), the investor is likely to receive the funds by the end of the next business day (T+1). The investor would be able to utilise the next day (T+2). However, sometimes there may be a delay on account of technological glitches (most of the transactions occur through direct credits and electronic fund transfers). We would of course put in our best efforts to process transfers at the earliest. We cannot give an assurance on the timelines. SEBI allows a timeline of 10 business days within which the fund needs to process redemption requests.