Overnight Funds, In the realm of investment, finding the perfect balance between risk and return is akin to seeking the Holy Grail. Overnight mutual funds emerge as a beacon for investors aiming for liquidity with minimal risk exposure. This in-depth exploration will navigate through the intricacies of overnight mutual funds, focusing on the quintessential options available in India, such as Axis, Aditya BSL, ICICI Prudential, SBI, and HDFC Overnight Funds.

What Are Overnight Mutual Funds?

Overnight mutual funds invest in overnight securities, promising returns with a single-day maturity. These funds are the epitome of low-risk investments, offering liquidity without compromising on safety. Ideal for conservative investors and those seeking a parking space for their short-term surplus, overnight funds are an essential tool in a savvy investor’s arsenal.

Features and Benefits

• Low Risk: With investments in high-quality overnight securities, these funds carry the lowest possible market risk.
• Immediate Liquidity: Provides investors with the ability to enter and exit the fund within a short notice, ensuring high liquidity.
• Stable Returns: Though not aimed at high returns, they offer stability and predictability in income, making them a safer bet than many other short-term investments.
• Low Expense Ratio: With minimal management and operational costs, overnight funds are cost-effective investment avenues.

1. Axis Overnight Fund

• Expense Ratio: 0.05%
• 3-Year CAGR: 5.03%
• AUM: ₹10,433 Crores

The Axis Overnight Fund is a premier choice for investors seeking a blend of safety, liquidity, and modest returns over the short term. With an impressively low expense ratio of just 0.05%, it stands out for its efficiency and cost-effectiveness. Over a three-year period, it has delivered a Compound Annual Growth Rate (CAGR) of 5.03%, showcasing its ability to offer stable returns in a volatile market. The fund manages assets worth ₹10,433 crores, reflecting strong investor trust and a substantial scale of operations. Its focus on overnight securities ensures minimal credit and market risk, making it an ideal vehicle for parking surplus funds with an expectation of liquidity the next day.

2. Aditya BSL Overnight Fund

• Expense Ratio: 0.08%
• 3-Year CAGR: 5.01%
• AUM: ₹8,689 Crores

The Aditya BSL Overnight Fund offers a secure, liquid investment solution with a slightly higher expense ratio of 0.08% compared to its peers. Despite this, it has consistently provided investors with a CAGR of 5.01% over three years. With ₹8,689 crores under management, it is a testament to its popularity and reliability among short-term investors. The fund’s strategy involves investing in high-quality overnight assets, minimizing risk while ensuring the availability of funds for next-day redemptions. It is an excellent option for those looking to invest their idle cash without compromising on safety or liquidity.

3. ICICI Prudential Overnight Fund

• Expense Ratio: 0.1%
• 3-Year CAGR: 4.99%
• AUM: ₹10,419 Crores

This fund is a solid contender in the overnight mutual fund category, boasting an expense ratio of 0.1% and a three-year CAGR of 4.99%. With assets under management amounting to ₹10,419 crores, the ICICI Prudential Overnight Fund is a testament to its robust management and investor confidence. It targets investors seeking to mitigate their exposure to volatility while earning steady returns over short periods. The fund’s investment strategy focuses on overnight securities, ensuring high liquidity and low market risk, appealing to conservative investors and those with short-term financial goals.

4. SBI Overnight Fund

• Expense Ratio: 0.1%
• 3-Year CAGR: 4.97%
• AUM: ₹16,587 Crores

The SBI Overnight Fund is designed for investors looking for a safe parking avenue for their surplus funds, offering a CAGR of 4.97% over three years and an expense ratio of 0.1%. It is the largest among its peers, with an impressive ₹16,587 crores in assets under management, indicating a high level of trust and preference among investors. The fund invests exclusively in overnight securities, which significantly reduces its risk profile and makes it an attractive option for investors seeking minimal risk and high liquidity.

5. HDFC Overnight Fund

• Expense Ratio: 0.1%
• 3-Year CAGR: 4.96%
• AUM: ₹10,920 Crores

With an expense ratio of 0.1% and a three-year CAGR of 4.96%, the HDFC Overnight Fund is another excellent option for investors prioritizing safety and liquidity. It manages ₹10,920 crores in assets, reflecting its solid market presence and investor confidence. Like its counterparts, the fund invests in overnight securities, offering investors a secure and liquid investment solution. It is ideal for those looking to earn returns on their idle cash with the assurance of next-day access to their funds.

How to Choose the Right Overnight Mutual Fund?

Selecting the right fund involves examining the expense ratio, fund performance, fund manager’s expertise, and the AUM. Lower expense ratios can result in increased net returns for investors. Additionally, stability in returns and the scale of AUM can reflect the fund’s reliability and efficiency.

Risks Involved

While overnight funds are among the safest investment options, they are not entirely devoid of risks. Interest rate fluctuations and operational risks are inherent, though significantly lower compared to other fund categories.

Conclusion

Overnight mutual funds stand out as an exemplary choice for investors seeking short-term investment avenues with minimal risk. By carefully selecting a fund that aligns with their risk tolerance and return expectations, investors can make the most out of their surplus funds. The key lies in understanding the nuances of each fund, from expense ratios to performance metrics, to unlock the potential of overnight investments.