FMP
Fixed Maturity Plans (FMP MF) stage a comeback
November 5, 2009 by FMP expert
Sponsored Ads
Fixed Maturity Plans (FMP Mutual Funds) are the rage in the mutual fund NFO market
Just some time back, FMP new fund offers had virtually vanished. After the debacle in FMP mutual funds last year, fixed maturity plans had been shunned by high individuals (HNIs), retail and institutional investors in India
Fixed Maturity Plans (or FMP mutual funds) new fund offers have returned in huge numbers
New Fixed Maturity Plans (FMP new fund offers) have been launched by ICICI Prudential Mutual Fund, HDFC Mutual Fund, Fortis Investments, JM Financial and Tata Mutual Fund in the last month. Per sources, the response to these FMP MFs (fixed maturity plan mutual funds) has been excellent from institutional, corporate and retail investors
Recently launched FMP MFs (fixed maturity plan mutual fund offers) may offer lower returns than last year but the returns will be more secure
New FMP MF NFOs will probably offer lower return than the fixed maturity plans offered by mutual funds last year, but there is really no estimated return. However, the recent SEBI regulations regarding FMP Mutual Funds have ensured that the investments in fixed maturity plans are more secure. There seems to be little chance of the disaster that almost hit mutual funds that dealt with FMP products last year
Revived interest in FMP Fixed Maturity Plan New Fund Offers by India Mutual Funds – SEBI deserves a major portion of the credit
SEBI definitely took steps in the right direction with regulations to rein in rampant FMP NFOs that invested in risky debt portfolios in the search of the elusive higher yields. With SEBI ‘s new reforms, there are strict restrictions and disclosures needed from MFs in India launching Fixed Maturity Plan (FMP) new fund offers (NFOs).
Are FMP Fixed Maturity Plans from Indian Mutual Funds such as ICICI Prudential, HDFC,Fortis & Tata Mutual Fund liquid anymore?
Liquidity in FMP Fixed Maturity Plan Mutual Funds? Absolutely not! Though SEBI insists on having the FMP listed on the exchanges as a debt fund, not too many trades are taking place in FMP funds.
However, liquidity is not the only criteria for FMP investors- the improvement in the quality of investments by FMP MFs has drawn retail, institutional investors back to Fixed Maturity Plans
You are right about FMPs staging a comeback? I had a question though..Are FMPs safe now?
FMPs are comparatively safer than last year due to SEBI’s regulations. But you still need to read the fineprint.. The choice is between liquid funds and FMPs
Belinda
Excellent question on choosing the right FMP (fixed maturity plan)
A few factors to consider while choosing between FMPs (fixed maturity plans)
Maturity of the FMP : The first thing that you need to figure out is what maturity of FMPs you need to choose from a mutual fund house. Based on market conditions, the current interest rates, potential for rise and fall of interest rates etc will help you determine what maturity of fixed maturity plans you need to buy. For example, do you need a short term 3 month FMP plan or a 1-year FMP or a 2-3 year FMP. This is the first step to take while choosing a fixed maturity plan. In addition, please also analyze your own liquid position. Since FMPs cannot be redeemed prior to maturity, please make sure that you have enough liquidity and spare cash since you will not be able to withdraw the FMP investment in case of an emergency
When to buy an FMP : This decision on when to buy a fixed maturity plan from a mutual fund house is very important. Due to the present FMP taxation rules favouring buying FMPs close to the end of the fiscal year, you need to check which FMPs are available at the end of the fiscal year and which mutual fund houses are offering those FMPs.
Which mutual fund house to choose for buying FMPs : The choice of the mutual fund house to buy a fixed maturity plan is of course extremely important. Choosing a mutual fund house such as HDFC Mutual fund, ICICI Prudential Mutual Fund or any of the other mutual funds requires careful study if you want to ultra-careful about your investment. Apart from the credibility of the mutual fund house, please also watch the credibility of the mutual fund manager who manages the debt and fixed maturity plan funds in the MF house. Very often, the overall mutual fund house may be great and credible, but the individual mutual fund manager may have a poor track record leading to poor fixed maturity plan (FMP) returns.
Beware of FMPs offering unreasonable returns : If a mutual fund house offers fixed maturity plans (FMPs) that seem to suggest unreasonable or ultra- high returns , please watch out. Fixed Maturity Plans are debt instruments that will never give you the returns of speculative dot com stocks! Do your research before choosing a FMP
Please read FMP fact sheets before choosing a fixed maturity plan : Its important that you check out the fact sheets of every mutual fund house before investing in a FMP.
Best of luck on buying the right fixed maturity plan (FMP)!