{"id":83661,"date":"2018-06-21T05:58:22","date_gmt":"2018-06-21T05:58:22","guid":{"rendered":"http:\/\/www.bnreport.com\/investors-lap-up-fmps-as-yields-firm-up\/"},"modified":"2018-06-21T05:58:22","modified_gmt":"2018-06-21T05:58:22","slug":"investors-lap-up-fmps-as-yields-firm-up","status":"publish","type":"post","link":"https:\/\/www.bnreport.com\/en\/investors-lap-up-fmps-as-yields-firm-up\/","title":{"rendered":"Investors lap up FMPs as yields firm up"},"content":{"rendered":"

Fixed maturity plans<\/a> (FMPs<\/a>) are attracting investors money as they can earn 8.1-8.5% over a three-year period, after the recent rise in rates. <\/p>\n

These FMPs have garnered close to Rs 12,000 crore in the first couple of months of this financial year as retail investors<\/a>, HNIs and corporates have locked money at these high rates. Such FMPs are being offered by Aditya Birla SL MF, IDFC, ICICI, Edelweiss, DSP, HDFC, Invesco, Kotak, Sundaram, Tata and UTI, with tenures from 1080-1405 days, and will be open over the next fortnight. <\/p>\n

Wealth managers<\/a> believe investors find rates above 8% attractive to lock in and some money is shifting from debt fund categories which fared poorly in the past one year. <\/p>\n

\u201cPoor returns of 1-2% over the past year due to a volatile debt market in categories like income, dynamic bond and gilt funds have made some investors shift to FMPs, where there is certainty of returns and no volatility,\u201d said Rupesh Bhansali, head (distribution), GEPL Capital. <\/p>\n

With the 10-year benchmark trading at 7.86%, investors can earn as much as 8.1-8.5% from an FMP which has the highest rated AAA portfolio. If one goes slightly lower and has a 50:50 mix of AAA and AA paper, the yields could inch up by 20-25 basis points. <\/p>\n

An FMP portfolio consists of various fixed income instruments with matching maturities. Based on the tenure of the FMP, a fund manager invests in instruments in such a way that all of them mature around the same time. During the tenure of the plan, all the units of the plan are held until they mature on a specified date. Thus, investors get an indicative rate of return of the plan. <\/p>\n

Since FMPs invest in papers with a maturity period equal to the tenure of the FMP, theres no interest rate risk, which eliminates volatility of returns. In addition, lower expense ratio and banks accepting them as a collateral for loan are also a selling point for FMPs. <\/p>\n

The biggest benefit of FMPs is that once they are held for more than three years, investors can enjoy indexation benefits which increase post tax returns, especially for HNIs. <\/p>\n

\u201cAssuming an FMP were to yield 8.1%, the post-tax return for an investor, assuming a 4% inflation, would be 7.3%. This is far more lucrative than a bank fixed deposit which pays 6,5% and gives a post-tax return of 4.6%,\u201d said Radhika Gupta, chief executive officer, Edelweiss Mutual Fund. <\/p>\n

Fund managers believe investors should use this high interest rate environment to lock in money into these fixed maturity plans (FMPs). <\/p>\n

\u201cInvestors not fixated with liquidity should lock in their money at the current yields as it provides a good opportunity,\u201d said Lakshmi Iyer, head (fixed Income), Kotak Mutual Fund. <\/p>\n

<\/a><\/strong> <\/a><\/p>\n

Original Article<\/a><\/p>\n

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ET Markets<\/a><\/h5>\n

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Fixed maturity plans (FMPs) are attracting investors money a..<\/p>\n","protected":false},"author":1,"featured_media":83662,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[202],"tags":[],"class_list":["post-83661","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-finance"],"yoast_head":"\nInvestors lap up FMPs as yields firm up - Business News Report<\/title>\n<meta name=\"description\" content=\"Fixed maturity plans (FMPs) are attracting investors money a..\" \/>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.bnreport.com\/en\/investors-lap-up-fmps-as-yields-firm-up\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Investors lap up FMPs as yields firm up - 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