HDFC Mutual Fund is offering two New Fund Offer (NFO) in the month of Jan 2012, under its Fixed Maturity Plans- Series XIX closed-ended income scheme.
The two funds under offer are:
- HDFC FMP 92D January 2012 (2), open from Jan 12 to Jan 18, with a duration of 92 days.
- HDFC FMP 370D January 2012 (3), open from Jan 12 to Jan 17, with a duration of 370 days.
Brief on Fixed Maturity Plans
Fixed Maturity Plans (or FMP) are funds with a fixed maturity date and with investments in debt instruments such as Certificate of Deposits (CDs), Commercial Papers (CPs), money market instruments and corporate bonds. FMPs are closed ended schemes and fund houses generally provide an indicative rate of return on the basis of where the investments are going to be done.
Scheme Information
Both the schemes offer similar features for investors. The duration of the schemes however vary. The primary aim of the schemes is to generate regular returns by investing in debt instruments, money market and Government securities, which would be maturing on or before the maturity date of the respective plans.
Ø Options available under the scheme:
The scheme offers investors a growth as well as a dividend option. The dividend option offers a choice of dividend payouts quarterly or a normal dividend option with payout facility only.
Ø Load:
There would be no entry and exit load applicable on the scheme.
Ø Minimum application:
The minimum application amount is Rs.5, 000 and in multiples of Rs 10 thereafter.
Ø Portfolio composition:
The scheme would invest 60% to 100% in debt and money market instruments of low to medium risk and the balance in government securities on low risk.
Ø Liquidity:
There is no lock in period applicable on the scheme. Investors can further purchase or redeem units from the National Stock Exchange where they would be listed. Units however cannot be directly redeemed from the fund, until the maturity date of the plan. On maturity, units will be paid out on the basis of the applicable NAV on the date of redemption.
Ø Credit rating of the scheme:
The scheme will be benchmarked against CRISIL Short Term Bond Fund Index.
Ø Dematerialization of units:
Investors have the option to hold the units in demat form.
For Whom is the Scheme Suitable?
Fixed Maturity Plan is a low risk investment option. The dividend received from a FMP is tax free in the hands of the investor, and they offer better post tax returns in comparison to fixed deposits. They also provide indexation benefits for investors.
FMPs however do not guarantee capital protection and the returns shown by the fund house are only indicative. Thus such schemes are ideally suitable for those investors who have the capacity to take a little bit of risk for tax efficient returns.
HDFC Mutual Fund house already has more than 20 such FMP schemes of different durations. Given their past track record and reputation to consistently perform, investors could definitely be optimistic of some decent returns from the scheme.
Author
Ramya Ramachandran