What is the difference between the institutional and regular plans of liquid funds? Who can invest in an institutional plan?
-Siddharth Sudame
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.
This article was originally published on July 21, 2006.
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