The fund house will issue a series of seven target maturity funds, with tenors ranging from 15 to 33 months, as it believes yields remain lucrative at the lower end of the yield curve. Investors in such schemes could earn a spread of 50-80 basis points over sovereign government securities or fixed deposits.
New fund offers (NFO) for two of these schemes have already been launched and five more are expected in the coming days. These schemes will build a portfolio of 10-12 securities comprising a mix of AAA rated non-banking financial companies (NBFCs) and housing finance companies (HFCs) with exposure to a single company not exceeding 15%.
Financial planners I believe these target maturity funds offer investors the opportunity to earn more than bank deposits with high interest rates. liquidity. These schemes will not have any lock-up or exit load and can be redeemed on any business day, providing investors with good liquidity.
Target maturity funds are passive debt funds that track an index of debt instruments. These funds faithfully replicate the composition of the underlying index. Unlike other open-end mutual fund schemes, target maturity debt funds have specific maturity dates, and investors holding units of target maturity funds eventually get back the principal amount.
While a 1-3 year fixed term bank deposit could return investors between 7% and 7.25%, a portfolio of AAA rated NBFCs plus HFCs could return around 8%. After adjusting for an expense ratio of 15 basis points, investors could earn 60 to 80 basis points more than a fixed deposit. Financial planners believe such a product could work well for those seeking liquidity and short-term goals. “This product works for investors who want a fixed return, are in tax brackets and want to take advantage by locking in funds at higher interest rates before the rate cut cycle begins,” said Amol Joshi, founder of Rupee Plan.
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