Understanding TREPS in your mutual fund portfolio

Understanding TREPS in your mutual fund portfolio

The full form of TREPS is Tri-Party Repo Dealing System which means a repo contract where a third entity (apart from the borrower and lender), called a Tri-Party Agent, acts as an intermediary between the two parties to facilitate services like collateral selection, payment and settlement, custody and management during the life of the transaction.

"Repo" is an instrument for borrowing funds by selling securities with a few prerequisites:1. An agreement to repurchase the securities on a mutually agreed future date 2. At an agreed price including interest for the funds borrowed

Triparty Repo i.e.TREPS facilitates borrowing and lending of funds through Triparty Repo arrangement. The Clearing Corporation of India Limited (CCIL) would be the Central Counterparty to all trades from TREPS and would also perform the roles and responsibilities of Triparty Repo Agent, in terms of Repurchase Transactions (Repo).

This arrangement usually lasts for a short period, from overnight to a few weeks.

Why Do Mutual Funds Use TREPS?

Mutual funds may use TREPS for a few reasons:

Liquidity management:
TREPS stands out due to their quick liquidity, making them an optimal choice for mutual funds seeking short-term placement of idle cash.

Portfolio Diversification:
Mutual funds aim to diversify their portfolios to manage risk effectively. TREPS offers a low-risk, fixed-income component that complements other holdings within the fund that may be more riskier. This diversification may help in risk management and managing the liquidity requirements of the scheme.


In short, TREPS emerges as a crucial financial tool within the landscape of mutual fund investments. They're good at efficiently managing short term liquidity making them a good choice for fund managers to include them as part of the mutual fund portfolio.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully

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Published on 16 May 2024