The Hindu Business Line : Fixed maturity plans gaining in popularity

Fund corner
According to an estimate, about Rs 20,000 crore or so are being managed under FMPs
`These schemes have lately started attracting some high net worth individuals as well'

Kolkata , Aug. 8

Away from the clamour over gold and real estate funds, an altogether different category of products is assuming great importance in the MF space - fixed maturity plans (FMPs).

FMPs, according to an estimate, are already in a league of their own, thanks to the amount of Rs 20,000 crore or so they are managing right now.

While opinions may differ as to the exact amount being handled by FMPs, fund circles agree that these plans are set to account for an even bigger share of assets.

The reason is clear: fund houses, big and small, are lining up more and more FMPs.

A number of players have sent offer documents to the SEBI, many of these bearing numerals that make them part of a series.

Among these are FMPs mooted by Prudential ICICI, Kotak Mahindra, DSP Merrill Lynch, ING Vysya and DBS Chola.

Mr Rajan Krishnan, Business Head of Principal MF, said: "An FMP has now become a fairly standard way of mobilising money, especially from a well-defined set of investors."

FMP clients are generally institutions that need to park their resources for a pre-determined period.

Others, including fund distributors, point out that FMPs have lately started attracting some high net worth individuals as well.

Mr Sameer Kamdar, National Head (MFs), Mata Securities, said that select individuals are also becoming keen to lock into these options.

"FMP collections have jumped substantially as they offer attractive returns to both retail and corporate customers," he added, while analysing the July inflows.

A normal FMP is a close-end product, sometimes with various plans, each seeking to generate returns by investing in a basket of fixed income securities maturing in line with the time profile of the plans.

However, as sources said, no FMP guarantees the fulfilment of its investment objective.

ING Vysya MF's fixed maturity fund, Series XVI, for instance, is positioned as `a close-end bond scheme' offering a plan with 367 days' maturity.

The idea, according to the offer document, is to invest in Government securities or highly rated corporate bonds maturing close to the maturity of the scheme so as to generate returns comparable with alternative fixed income instruments of similar maturity.

According to Mr N. Sethuram, CIO of SBI MF, fixed maturity products have become quite common in the realm of mutual funds. SBI MF itself has come out with more than one fund in recent times, adding about Rs 1,000 crore to its total assets.

"As a matter of strategy, an FMP should not have a very small size. But getting money into FMPs does not seem so difficult these days. Some of our recent efforts have led to not less than Rs 100 crore," he said.

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