Liquid funds: Don't focus on returns too much, look at expense ratio

Investors should also look at expense ratio, portfolio quality and track record

Investors, after the defaults in debt funds, are seeking comfort in large liquid funds. Last year, there was only one fund with assets under management (AUM) of more than Rs 50,000 crore. Now, four schemes have crossed that mark. The largest scheme, HDFC Liquid Fund, has AUM of Rs 86,446 crore.

The money is flowing not just because of the size of the funds but also because these schemes belong to fund houses with a track record. “There is a perception that smaller fund houses would chase returns to get more business, which could push them to make risky investments.