Overnight schemes gain traction as Sebi tightens norms on liquid funds

Overnight schemes - those that invest in papers with maturity of as short as a day - are gaining traction as institutional investors are increasingly viewing it as a better alternative

Fund managers say risk-reward is no longer in favour of liquid schemes. “Portfolio yields on liquid schemes are about 5.7 per cent, which is marginally higher than overnight schemes’ 5.2 per cent,” said one fund manager. From June to August, overnight schemes’ average AUM moved from Rs 12,574 crore to Rs 20,717 crore; a jump of 64 per cent. This coincided with Sebi’s move to introduce a slew of tighter norms on liquid schemes. Fund managers said that as these norms get implemented, overnight schemes are likely to become even larger.
 
“While returns on liquid schemes will moderate further