What is the difference between the institutional and regular plans of liquid funds? Who can invest in an institutional plan?
The basic difference between regular and institutional plans is in the expense ratios and the minimum investment amounts. Institutional plans generally have a very high minimum investment requirement and they are more economical than their regular counterparts. For example, Sundaram BNP Paribas Floating Rate ST Regular has an expense ratio of 1 per cent and a minimum investment of Rs 5,000. In contrast, the institutional plan of the same fund has a much lower expense ratio of 0.49 per cent, but a substantially higher minimum investment amount of Rs 1 crore. A lower expense ratio translates into higher returns for the institutional plan investors. For the category of liquid funds, even a difference of few basis points in expense ratio, and in turn the returns, means quite a lot. There is no difference as far as the fund management is concerned. Both have a common portfolio. Moreover, subject to the minimum investment amount, anyone who invests in a regular plan can also invest in the institutional plan.