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B. Venkatesh

Benchmark Mutual Fund recently introduced Liquid BeEs. What is this fund?

Liquid BeEs is an exchange-traded fund (ETF) that invests in calls, Treasury Bills and other short-term fixed-income securities. The units can be bought from the NSE. The minimum lot is one with a face value of Rs 1,000.

But why invest in Liquid BeES? Suppose you sell, say, 100 shares of Reliance Industries at Rs 350 per share. You will receive a cheque from your broker on the third day (T+3). It may take another two days for the bank to credit your account. This essentially means that your money does not earn any returns for five days.

Suppose you buy Liquid BeEs on the same day you sell Reliance shares. The stock exchange will net the total sales and purchases you have made.

If the value of Liquid BeEs is equal to the proceeds from the sale of shares, you will not receive a cheque from your broker. Instead, your account will be credited with Liquid BeEs on the second day (T+2); this means you can earn returns from the second day.

Now, suppose you have to pay Rs 35,000 for buying 100 shares of Reliance Industries. At present, you will be required to pay your broker the next day (T+1). But if you sell Liquid BeEs and direct your broker to use that proceeds to pay for the Reliance shares, your account will only be debited on second day (T+2).

You can, therefore, earn returns for an additional day. In some ways, Liquid BeEs performs the function that StockInvest did for initial public offers.

Note that the portfolio of Liquid BeEs will be marked-to-market, unless it invests in only money market instruments. So, if the portfolio's market value declines, you will realise a lower price for your units.

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