Reliance Liquid Exchange Traded Fund NFO

The Reliance Liquid ETF will be the second liquid ETF to be launched on the NSE. The Liquid BeES being the first one.

This is an ETF that will invest in a portfolio of short term government securities, money market instruments, and other debt securities of short and medium term maturities.

The minimum application amount during the initial offer will be Rs.5000. After it lists, you can buy it from the stock exchange, and there is really no minimum limit outside of what your broker imposes for a particular trade.

The fund plans to charge expenses to the tune of 2.25% of weekly average net assets, which seems a bit high to me, especially because this fund is going to invest in short term securities which generally have smaller returns, and this fee can eat into those returns quite easily. Compared to this, Liquid BeES has an expense ratio of 0.60%, which is significantly cheaper.

Personally, this kind of thing makes me want to wait and watch, and see how the fund develops over the years. There is not enough information right now to tell you that the extra money you pay in fee will result in superior returns, so why pay more right now?

You also don’t know whether a market will develop for the Reliance Liquid ETF, and whether there will be active buying and selling in the secondary market for this ETF. If an active market is not formed, then that could mean not getting good quotes for your investments, and that’s not good at all.

I really can’t think of any good reasons for getting into this NFO, but if you have one, — do leave a comment.

Disclaimer: This is just my personal opinion, and not investing advice of a professional money manager that you could follow.

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