For those risk-averse investors, who lately had an acrimonious ‘break-up’ with equity are advised to explore fixed maturity plans and put their money to good use — without having to bear the risk of capital.
Sample this. HDFC launched NFO for fixed maturity plan - series 46. It is a close ended income scheme with a tenure of 1,876 days i.e., a little over 5 years.
This is projected as a scheme for those investors who want a regular income over 1876 days, and who want investment in day and money market instruments and government securities.
Named as HDFC FMP 1876D March 2022, the NFO opened on March 23 and will close on March 28. The minimum amount for application during NFO is ₹5,000 and in multiple of ₹10 thereafter per application.
The maximum total expense ratio (TER) on assets under management (AUM) of ₹500 crore is up to one percent.
This is how the scheme will allocate its assets:
In case the asset allocation falls outside the limits, the fund manager will rebalance the same within a specified time period.
For plan with a maturity period of up to 30 days, rebalancing will happen within two days. For maturity of up to 30 days but less than 3 months, rebalancing will happen within 5 business days.
And for maturity more than three months but up to six months, maximum rebalancing period is 15 business days. At the same time, for maturity beyond six months, rebalancing will take plan within 30 business days.
Where will the scheme invest?
The scheme will invest in a range of debt instruments and money market instruments. These include the debt instruments such as debt issuances of the Government of India, state and local governments, government agencies and statutory bodies, debt instruments guaranteed by Government of India and state governments, debt instruments issued by Corporate Entities (Public / Private sector undertakings), debt instruments issued by public / private sector banks and development financial institutions, securitised debt, structured obligations, credit enhanced debt, nonconvertible redeemable preference shares and repo in Corporate Debt Securities
At the same time, money market instruments include commercial papers, commercial bills, usance bills, treasury bills, government securities having an unexpired maturity up to one year, tri-party Repos on Government securities or treasury bills (TREPS), certificate of deposit and permitted securities under a repo/ reverse repo agreement (other than corporate debt securities).
Scheme goals
The key objective of the scheme is to make income via investments in debt and money market instruments and government securities maturing on or before the plan’s maturity date.
The scheme has the flexibility to invest in a range of debt instruments and would seek to minimise interest rate risk while avoiding undue credit risks.
It would make investment in securities in the investment universe based on market spreads and liquidity, to match the investment horizon with the scheme maturity.
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The investments would be based on interest rate expectations arising out of macroeconomic analysis. This entails analysis of inflation data and trends in macro variables such as credit growth, liquidity, fiscal numbers, money supply growth and the global interest environment.
However, investors are supposed to be aware that the price per unit which they have to pay to invest during the NFO is ₹10.
Also, the minimum target amount to be raised is ₹20 crore. And in case the fund fails to collect the minimum subscription amount of ₹20 crore under the respective plan, the mutual fund will refund the subscription amount.