ICICI Prudential New India FMP-Fixed Maturity Plan Series 49 – 1 Year Plan C

ICICI Prudential MF has launched a new FMP NFO in India-Fixed Maturity Plan Series 49 – 1 Year Plan C

Fixed Maturity Plan Series 49 – 1 Year Plan C is another FMP NFO as ICICI Prudential Mutual Fund joins the FMP bandwagon, by reviving its FMP NFO launches

Fixed Maturity Plan Series 49 – 1 Year Plan C from ICICI Prudential Mutual Fund- Start and end dates of the NFO

Start date of Fixed Maturity Plan Series 49 – 1 Year Plan C – 12 Oct 2009

End date of Fixed Maturity Plan Series 49 – 1 Year Plan C – 22 Oct 2009

Maturity of ICICI Prudential Mutual Fund FMP-Fixed Maturity Plan Series 49 Plan C

Fixed Maturity Plan Series 49 Plan C has a maturity of 1 year

Options for ICICI Prudential MF FMP-Fixed Maturity Plan Series 49 Plan C

ICICI Prudential FMP NFO-Fixed Maturity Plan Series 49 Plan C has 3 options

• Retail plan for Fixed Maturity Plan Series 49 Plan C- Minimum Rs 5000
• Institutional Plan I-Minimum 10 Lakh
• Institutional Plan- Minimum 25 Lakh

No entry, exit loads for ICICI FMP Fixed Maturity Plan Series 49 Plan C

Keeping with SEBI rules, there are no entry and exit loads for this ICICI Prudential MF FMP-Fixed Maturity Plan Series 49 Plan C. The FMP will be listed on the stock exchange

Fixed Maturity Plans (FMPs) out of favor with institutional investors?

Fixed maturity plans ( FMP mutual funds ) losing popularity with institutional investors in India

Fixed maturity plans , popularly known asFMP mutual funds, seem to be currently out of favor with institutional investors. The number of new FMP mutual funds launched in India has been dwindling since we had the scare with the perceived liquidity crisis in the mutual fund industry in India.

In fact,a check of new IPO open issues in India, suggests that almost no new FMP mutual fund IPOs (Fixed Maturity Plan IPOs) have been launched this month

The new SEBI regulations on fixed maturity plans could have had an impact on the launch of new FMP IPO s in India

The strict regulations that SEBI introduced for new FMP mutual fund IPO launches may have had an impact on the launch of new fixed maturity plans. One of the requirements from SEBI was to have to have compulsory listing of FMP mutual funds in India, and some mutual funds may be in the process of getting their infrastructure in place in order to comply with SEBI norms

In summary, fewer FMP mutual funds (fixed maturity plans) are being launched by Indian mutual funds, but it is not clear whether this is due to the newer SEBI FMP regulations or a temporary blip in confidence in fixed maturity plans

SEBI ’s Fixed Maturity Plan (FMP) regulations controversial?

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

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

Closed ended funds such as FMPs have early withdrawl banned by SEBI

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

FMP action|SEBI to restrict FMP investments in realty,NBFC

FMPs (Fixed Maturity Plans) to be regulated, SEBI decides to control FMP investments in realty, NBFCs

Based on the recent FMP redemptions in the market, SEBI has conducted a research on FMP (fixed Maturity Plan) portfolio and concluded that there is significant exposure of FMPs to “volatile” sectors such as realty and NBFCs. Rumors of such low quality FMP paper and the credit crunch have recently led to large scale FMP redemptions by corporates

SEBI’s proposed dictat on FMP (fixed maturity plan) portfolios may hopefully calm the fears of corporates and HNIs who have invested large amounts of money in FMPs

SEBI actions on FMP portfolios will hopefully save the FMP asset class from being a pariah in the market

Fixed Maturity Plans (FMP) have been recently more popular even compared to bank FDs, and had been winning the FMP vs Bank FD competition for debt,but it looks like FMPs are now in deep trouble as an asset class

FMPs constitute almost 25% of assets of the Mutual fund industry and these SEBI actions are in the right spirit to safeguard the mutual fund industry. The recent redemptions in FMPs (fixed maturity plans) are quite scary and it is possible that FMPs as an asset class will disappear unless the SEBI takes stringent action against FMPs.

FMP portfolio disclosure is another area of concern and hopefully the SEBI will act on that aspect of FMPs as well

Fixed maturity plans (FMPs) do not disclose their asset portfolios to their investors,unlike asset classes such as equity or diversified funds. This aspect of FMPs has led to fund managers , typically in small funds, going beserk on FMP investments, including issuing debt to the “volatile” real estate sector

FMP investments in “real estate” constitute the biggest risk

FMP investments in real estate obviously are the biggest risk- as the real estate sector is poised to be disastrously affected by the recent downturn. Real estate companies also are heavily leveraged since they assumed that the bull market and the price escalation of real estate would last for ever

SEBI may also end the FMP “early exit” option

Despite the early exit penalty in FMPs , FMPs (fixed maturity plans) have seen large scale redemptions in recent months. SEBI may come up with a recommendation to reduce the temptation for large scale redemptions of FMPs soon.

In summary, FMP (fixed maturity plan) regulation by SEBI is a step in the right direction