Fixed Maturity Plans, Target Maturity Date Funds (TMF), Capital Protection Oriented Funds. Infrastructure Debt Funds. Real Estate Mutual Fund
- M Manohar Rao
- Jul 24
- 4 min read
Tags: Wealth Management, Investment Lesson, Mutual Funds, Mutual Fund Basics, Stock market, Budget, Finance, Investing, Personal Finance, Investment, ETFs, SIP
Fixed Maturity Plans are a kind of close-ended debt fund where the duration of the investment portfolio is closely aligned to the maturity of the scheme. AMCs tend to structure the scheme around pre-identified investments. Further, being close-ended schemes, they do not accept money post-NFO. Therefore, the fund manager has a little ongoing role in deciding on the investment options. Such a portfolio construction gives more clarity to investors on the likely returns if they stay invested in the scheme until its maturity (though there can be no guarantee or assurance of such returns). This helps them compare the risk and returns of the scheme with alternative investments.
Target Maturity Date Funds (TMF) are a type of debt mutual fund in India that offer a unique investment strategy. These funds are designed to mature on a specific date, typically ranging from 2 to 10 years, allowing investors to plan their financial goals accordingly. TMFs invest in bonds with matching maturities, minimizing reinvestment risk and providing predictable returns. They are ideal for investors seeking low-risk, income-generating investments with a defined horizon, such as retirement planning or children's education. Additionally, TMFs provide liquidity through listing on stock exchanges, allowing investors to exit before the maturity date if needed. In the last few years, the Indian mutual fund industry has witnessed growing interest in these funds. TMFs offer benefits like predictable returns, low credit risk, tax efficiency, and liquidity, making them an attractive option for investors seeking stable, long-term investments.
Capital Protection Oriented Funds are closed-end hybrid funds. In these types of funds, the exposure to equity is typically taken through the equity derivatives market. The portfolio is structured such that a portion of the principal amount is invested in debt instruments so that it grows to the principal amount over the term of the fund. For example, Rs.90 may be invested for 3 years to grow into Rs.100 at maturity. This provides protection to the capital invested. The remaining portion of the original amount is invested in equity derivatives to earn higher returns.
Infrastructure Debt Funds are investment vehicles that can be sponsored by commercial banks and NBFCs in India in which domestic/offshore institutional investors, especially insurance and pension funds can invest through units and bonds issued by the IDFs. Infrastructure Debt Funds (IDFs), can be set up either as a Trust or as a Company. A trust based IDF would normally be a Mutual Fund (MF), regulated by SEBI, while a company based IDF would normally be an NBFC regulated by the Reserve Bank.
According to SEBI Mutual Fund Regulations, IDF means a close ended mutual fund scheme that invests primarily (minimum 90 percent of scheme assets) in the debt securities or securitized debt instrument of infrastructure companies or infrastructure capital companies or infrastructure projects or special purpose vehicles which are created for the purpose of facilitating or promoting investment in infrastructure, and other permissible assets in accordance with Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 or bank loans in respect of completed and revenue generating projects of infrastructure companies or projects or special purpose vehicles. IDF-MFs can be sponsored by banks and NBFCs. Only banks and Infrastructure Finance companies can sponsor IDF-NBFCs.
Real Estate Mutual Fund scheme invests directly or indirectly in real estate assets or other permissible assets in accordance with the SEBI (Mutual Funds) Regulations, 1996. SEBI’s regulations require that at least 35 percent of the portfolio should be held in physical assets. Not less than 75 percent of the net assets of the scheme shall be in real estate assets, mortgage-backed securities (but not directly in mortgages), equity shares or debentures of companies engaged in dealing in real estate assets or in undertaking real estate development projects. Assets held by the fund will be valued every 90 days by two valuers accredited by a credit rating agency. The lower of the two values will be taken to calculate the NAV. These funds are closed-end funds and have to be listed on a stock exchange. Other real estate and infrastructure investment instruments allowed by SEBI are Real Estate Investment Trusts (REITs) and Infrastructure Investment Trusts (InvITs). However, these two are not mutual fund schemes.
Disclaimer:
The information set out above is included for general information purposes only and is not exhaustive and does not constitute legal or tax advice. All complaints regarding Mutual Fund can be directed towards visit www.scores.gov.in (SEBI SCORES portal). Readers are requested to make informed investment decisions and consult Chaitanya Financial Consultants – 9000628943 / mfd.mmr@gmail.com to determine the financial implications with respect to investing in Mutual Funds.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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