FMP
UTI Mutual Fund launches Fixed Term Series V Plan X- new FMP plan
December 24, 2008 by Ganesh · Leave a Comment
UTI Mutual Fund’s new FMP IPO- Fixed Term Series V Plan X
UTI Mutual Fund has launched a new FMP IPO- Fixed Term Series Series V Plan X. This UTI MF FMP is another typical FMP that seeks to invest in debt securities maturing around the same time as the duration of the FMP
Open and close dates of UTI MF Fixed Term Series V Plan X
This MF from UTI Mutual Fund is open from 16 December 2008 to 9 January 2009
Duration of UTI MF Series V Plan X FMP
UTI MF FMP Series V Plan X has a maturity date of 12 months. Since interest rates are expected to fall in the next 12 months, this FMP from the UTI Fund family is an interesting bet for investors who are still keen on fixed maturity plans
Entry and exit loads- UTI MF Series V Plan X
In a bid to prevent premature redemptions, UTI MF has set a steep exit load of 3% for this FMP
UTI MF Fixed Term Series V Plan X- Formats
UTI MF Fixed Term Series V Plan X comes in the following formats :
- Retail Growth FMP
- Retail Dividend FMP
- Institutional Growth FMP
- Instutional Dividend FMP
- SIP Growth FMP
- SIP Dividend FMP
SEBI ‘s Fixed Maturity Plan (FMP) regulations controversial?
December 17, 2008 by FMP expert · Leave a Comment
Is SEBI ‘s solution to the Fixed Maturity Plan problems against the interests of investors?
Sebi has recently announced a slew of regulatory measures to resolve the Fixed Maturity Plan induced Mutual Fund liquidity problem.
Given the run on FMPs and the resulting liquidity pressures on the Mutual Fund industry due to Fixed Maturity Plan scheme withdrawls, SEBI first offered a line of credit to the mutual fund industry
SEBI has also banned early withdrawls in new fixed maturity plans (FMPs). Now, investors in Fixed Maturity Plans cannot withdraw and liquidate their fixed maturity plan funds. So, even if investors want to get out of new FMPs at the cost of the high exit penalties, SEBI has ensured that the investors have almost no option but to wait till the fixed maturity plans finally mature, rather than getting an early redemption
Arguably, SEBI ‘s new regulation regarding Fixed Maturity Plan schemes will prevent FMP schemes and MFs from suffering from similar liquidity problems again and going bust, but SEBI has probably delivered a solution that principally benefits Mutual Funds – even those mutual funds with badly managed FMP schemes
SEBI has offered compulsory trading of fixed maturity plans in the stock exchanges as a sop to investors
Given that most of SEBI ‘s solutions to the liquidity problems of mutual funds seem to be focused on safeguarding the mutual fund industry rather than the investors, SEBI has introduced one small sop to investors in close-ended instruments such as fixed maturity plans
SEBI ‘s sop relates to compulsory trading of close-ended fund securities such as FMPs (fixed maturity plans) on the BSE,NSE stock exchanges. However, FMP investors may find that though the Fixed Maturity Plan schemes can be potentially liquidated in the stock market, these FMP schemes may end up be illiquid and not traded much in the markets
SEBI should realize that if a mutual fund does mismanage its FMP (fixed maturity plan) portfolio, investors in the FMP fund may not find many suckers who are willing to take the bad FMP debt paper from their hands at a reasonable price
In summary, SEBI seems to have made decisions regarding FMPs that are heavily loaded in favor of Mutual funds at the expense of investors
SEBI ‘s recent guidelines are great news for Mutual funds , but has SEBI done a good job of their primary role- safeguarding the interests of investors?
Close-ended funds such as FMPs to be listed on exchanges today
December 12, 2008 by Ganesh · Leave a Comment
Close-Ended Funds SEBI order: Fixed Maturity Plans ( FMPs ) and other close-ended funds have to be listed in BSE/NSE
Mutual Fund managers have to ensure that all close-ended fund schemes such as Fixed Maturity Plan schemes ( FMPs ) have to get their schemes listed on NSE/BSE today
Per SEBI, the only close-ended fund schemes that are excluded from this SEBI dictat are equity linked saving schemes
SEBI is taking the right steps to ensure liquidity problems looming in Mutual Funds due to withdrawls from FMPs (fixed maturity plans) is tackled soon
Liquidity problems in MFs is leading SEBI to take strong decisions regarding close-ended funds such as fixed maturity plans. Transparency and tradeability have been the key problems with close-ended funds such as FMPs- Sebi is doing the right thing by addressing both these issues.
However, some investors will probably suggest that SEBI is acting rather late and putting these measures earlier could have prevented the panic withdrawls from close-ended funds such as FMPs and the corresponding liquidity scare in the entire Indian mutual fund industry
Compulsory listing of close-ended funds such as FMPs in exchanges and stopping early withdrawls from fixed maturity plans is a good idea
SEBI has also ensured that early withdrawls from close-ended funds such as FMPs is a thing of the past (with or without minor exit load penalties). This will further ease the liquidity scare in the mutual fund industry
ICICI Prudential MF FMPs given high AAAF ratings by Crisil
December 6, 2008 by Ganesh · 8 Comments
ICICI Prudential MF FMPs have been given a superior AAAF rating by Crisil
Crisil , the credit rating agency has given a high rating to ICICI Prudential Mutual Fund’s FMPs. This fantastic rating for 35 of ICICI Prudential Mutual Fund FMP schemes is a huge boost for ICICI Prudential FMPs and fixed maturity plan schemes in general
The high rating for ICICI Prudential Mutual Fund’s FMPs indicates that the “credit risk” for these fixed maturity plans is limited
Recently, fingers have been pointed at FMPs for investing their assets in risky debt portfolios, including real estate companies and NBFCs. It looks like ICICI Prudential Mutual Fund’s FMP managers deserve a pat on the back for being conservative in their debt portfolios, leading to a lower credit risk
ICICI Prudential MF FMPs also score high in transparency
By publishing a regular fact sheet indicating their portfolios, ICICI Prudential MF FMPs have also demonstrated a high degree of commitment to transparency in their FMP portfolio investments
Crisil giving ICICI Prudential Mutual Fund a high rating for it FMPs is a short in the arm for the reputation of ICICI Prudential as a mutual fund house
FMP schemes from mutual fund houses have come under great scrutiny in the recent past and allegations of poor portfolio allocation and exposure to credit risk have been made against mutual fund houses in general
In this context, by giving ICICI Prudential FMPs a high rating, for over 35 FMPs, Crisil seems to be suggesting that ICICI Prudential is one of the better managed mutual funds with enough checks and balances in place
Closed ended funds such as FMPs have early withdrawl banned by SEBI
December 5, 2008 by Ganesh · Leave a Comment
Close ended funds including FMPs are to be held till maturity
New SEBI norms will bar close ended funds such as FMPs, otherwise known as fixed maturity plans,from allowing investors to withdraw their money before maturity>
Going forward, corporates and retail investors will be allowed to liquidate their closed ended funds only at the time of maturity
Close ended funds such as FMPs have come under SEBI scrutiny following the liquidity crunch that Mutual funds have faced recently
The recent panic premature withdrawl from close ended funds such as FMPs due to doubts about their asset quality of the portfolios of the close ended funds, had caused a major crisis in the mutual fund industry. Due to the liquidation pressure on close ended funds,RBI had to step in and offer a credit line of Rs 60000 crore to commercial banks in order to lend to the crisis ridden mutual fund industry
Close ended funds such as fixed maturity plans (FMPs) typically had a penalty to prevent early withdrawl but that obviously was not good enough
Close ended funds now will no longer offer a high penalty for early exit – in fact close ended funds will become almost illiquid since close ended funds such as FMPs cannot be redeemed before maturity. This will ensure that the close ended funds are not subject to panic selling, leading to a huge liquidity crisis for mutual funds
Exiting close ended funds to be possible only through the stock exchange
Close ended funds such as FMPs will now be forced to list on the stock exchange. These close ended funds can be exited only through the stock exchange , and not through investors demanding early withdrawl from the mutual funds
New norms on close ended funds such as fixed maturity plans to also ensure control on underlying assets
Close ended funds such as FMPs , can now hold underlying debt portfolios. who maturity will not exceed the maturity of the close ended fund itself. This will prevent short term close ended funds from holding debt assets that have longer maturities and exposed to higher level of credit risk
These new norms on close ended funds and fixed maturity plans to be applicable on all new close ended funds that are approved but not yet launched
All new close ended fund IPOs from mutual funds will have to follow the new norms for early withdrawl, as issued by SEBI. This will ensure that close ended funds such as fixed maturity plans are now finally under the radar of SEBI as SEBI tries to solve the liquidity risk to the mutual fund industry
Close ended funds may lose their current popularity due to SEBI’s recent norms, leading to more illiquid FMPs
As a result of SEBI’s norms, close ended funds may lose their popular status and it could be some time before investors and corporates start dumping all their money in FMPs again
The close ended FMP vs FD battle now may temporarily be won by bank fixed deposits as some HNIs may be reluctant to invest in close ended funds such as FMPs due to liquidity concerns