Impact of latest Silicon Valley Bank (SVB) episode

A swift collapse of the US based Silicon Valley Bank (SVB) made headlines in the Indian press over the weekend. On 10^th March 2023, US regulators shuttered the SVB after customers withdrew over $42bn, a quarter of its total deposits, in one day. 

Start-ups were the biggest clients of the US based Silicon Valley bank (SVB). SVB was a banker and financial ecosystem to most venture capital (VC) firms and their funded start-ups.

Is India impacted?

As we now find, not just silicon valley start-ups. Many of Bengaluru based Indian start-ups also had their overseas bank accounts set up with SVB.

Start-ups had parked their business cash and deposits with the SVB.

On Friday, March 10^th as panic spread, many realised that they could not access their bank deposits as SVB was seized and put under federal regulation.

More than 96% of the ¬USD 170 billion in deposits had no Federal Deposit Insurance Cover (FDIC) as it is limited to deposits upto USD 250,000 only.

Founders, CFOs and VC partners spent the weekend in anxiety.

The US Government and the Federal Reserve (FED) had to intervene over to take measures to safeguard depositors and prevent a financial system collapse.

Clearly, not all banks are as safe as perceived. Putting all the cash in bank also carry risk.

Your Emergency Money

This takes us to the more fundamental problem – where to keep your emergency cash? your business’ capital provisions? your employees’ salaries?

An easy and simple solution is to invest in a Liquid Fund which minimizes interest rate, credit, and liquidity risks.

Quantum Liquid Fund is the Option.  It always prioritises Safety and Liquidity over Returns. No compromises.

	Quantum Liquid Fund (QLF)
Market Risks	QLF can invest only in instruments with maximum maturity of 91 days. Interest rates risk is thus limited. In fact, rising interest rates are beneficial  for short term instrument maturity upto 91 days.
Mark-to-Market (MTM) Valuation	Since 2012, QLF has been marking to market its entire portfolio daily. We did this from 8 years before the actual regulation mandated by SEBI.
Credit Risk	QLF invests only in government, state government and AAA/A1+ rated Public Sector undertakings.
Liquidity Risk	QLF invests pre-dominantly in a mix of overnight instruments, treasury bills, PSU CDs/CPs, government securities. Allocation to TREPS + Treasury bills has averaged over 50% of the portfolio over the last 5 years.
Asset Liability Management/Stress Test	QLF has a good mix of retail, HNI and institutional investors. QLF also regularly stress tests its investor base to be able to meet large redemptions without much impact to the portfolio

QLF has never needed to access the RBI liquidity window: not in 2008; not in 2013 and not in 2020.

Over and above these, QLF stands out for one other reason.

As we have said before, Quantum Liquid Fund is amongst the best options for investors during rising interest rates.

The QLF portfolio, participates in a rising interest rate scenario by re-investing at higher rates with little market risks.

Chart – I: QLF portfolio yield closely tracks the yield on 3 months Treasury Bill

Source – Bloomberg, Quantum Fixed Income Team, Data as of February 28, 2022

Past performance may or may not sustain in future. The above chart is to be read in conjunction with the complete performance given below. 

Invest your cash surplus today and put all your worries to rest.

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#CRISIL Liquid Fund AI Index, ##CRISIL 1 year T-bill Index. Past performance may or may not be sustained in the future. Different Plans shall have a different expense structure.

*Simple Annualized. **Returns for 1 year and above period are calculated on the basis of Compounded Annualized Growth Rate (CAGR). Returns are net of total expenses. The scheme is managed by Mr. Pankaj Pathak. Mr. Pankaj Pathak is the fund manager managing the scheme since Mar 01, 2017. For other schemes managed by Pankaj Pathak, please click here.

The comparison with Fixed Deposits has been given for the purpose of general information / explanation purpose only. Unlike fixed deposit with Banks there is no capital protection guarantee or assurance of any return or insurance protection in Mutual Funds. Investments in Mutual Funds as compared to Fixed Deposits carry high risk, different tax treatment and subject to market risk. Investors are advised to take investments decision based on his / her investment objectives, risk appetite and arrive at informed decision before making any investment decision. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Disclaimer: The views expressed here in this Article / Video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The Article / Video has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of the Article / Video should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. None of the Quantum Advisors, Quantum AMC, Quantum Trustee or Quantum Mutual Fund, their Affiliates or Representative shall be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary losses or damages including lost profits arising in any way on account of any action taken basis the data / information / views provided in the Article / video. Mutual Fund investments are subject to market risks, read all scheme related documents carefully.