With target maturity funds becoming one of the top investment options in the fixed income space, asset management companies (AMCs) are coming out with differentiated target maturity funds to present a better risk-reward proposition, maximise yields, and also to make their product stand out in a sea of offerings, reported Business Standard.
Target maturity funds, which first started as fixed-tenure open-ended debt funds investing in papers of AAA-rated public sector companies, now have at least 10 varieties, if one looks at the asset mix of the portfolios.
There are now schemes that exclusively invest in gilt, state development loans (SDL), or AAA-rated corporate papers. Beyond these, there is another range of schemes that has a different mix of these papers like Nifty AAA Bond Plus SDL 50:50 Index and CRISIL IBX 70:30 CPSE Plus SDL Index.
According to industry officials, fund houses have been forced to ideate new types of schemes, given the rising competition in this space.
“There is a cut-throat competition. Every AMC wants its scheme to have the highest possible yield-to-maturity (YTM) to be able to attract high inflows, and are hence forced to experiment,” said a top MF executive.
“Variety is always good, especially in a country that is used to saying aur dikhao when buying things,” the executive said.
At present, the different mix of assets has not led to a major difference in either past returns or in YTMs, which are a good indicator of future returns. There are five schemes maturing in 2025 and YTMs of all the three are in the range of 7.36 per cent-7.5 per cent, according to Value Research data.