ICICI Prudential Mutual Fund has launched ICICI Prudential Liquid ETF. A liquid ETF is similar to a liquid fund, except that it is traded actively on the stock exchanges. You will need a demat and trading account to buy it unless you are buying it in very large quantities. Liquid funds and liquid ETFs invest in a very short-term paper and are considered to be relatively immune to interest rate hikes and credit risk. However, there is no formal guarantee attached to them.
A liquid ETF is useful for stock investors, allowing them to earn returns on money they would have otherwise left idle in a brokerage account. When such investors wish to buy stocks, they can instantly sell the liquid ETF and buy the desired stock. Investors in Zerodha get a similar deal by default with DHFL Instacash Fund, as you can read here.
The New Fund Offer (NFO) of ICICI Prudential Liquid ETF will run from 10th to 24th September. The fund will take its place in India’s small universe of liquid ETFs alongside Reliance ETF Liquid BeES and DSP Liquid ETF. The former has 1-year returns of 5.32% and 3-year returns of 5.46% (CAGR). The latter, launched in March 2018, has 3-month returns of 0.91%.
The scheme will primarily invest in Collateralised Borrowing Lending Obligations (CBLOs), highly short-term instruments. It will be benchmarked against the S&P BSE Liquid Rate Index. The index has a limited history but it has a one year return of 6.01%. ICICI Prudential Liquid ETF has a minimum investment limit of Rs 5,000.
Rohan Maru who manages various ICICI MF debt schemes like ICICI Pru MF Corporate Bond Fund and ICICI Pru MF Liquid Fund will manage this fund. However, a fund manager’s role is limited to a passive ETF which tracks an index.