iquid funds have been around for a long time. The first liquid fund, as per Value Research, was launched in 1997. Today, almost all mutual funds have a liquid fund. Liquid funds have also come a long way in terms of the market risks they can take. I have heard of instances of longer-tenor bonds being part of the liquid fund portfolio in the early 2000s till Sebi, in its steadfast investor protection, introduced maturity restrictions in the portfolios.
Liquid funds were first moved to a regulation where investments had to be made in less than 1-year maturity and instruments which need to be marked-to-market cannot be more than 10% of the portfolio. This markedly reduced the market risks that a liquid fund could take on.
