Fixed maturity plans (FMPs), which offered high returns attracting investors in hordes in a high-interest rate regime, have lost their sheen. FMPs have lost over Rs 50,000 crore in assets since June last year after the budget stipulated that debt funds would be eligible for tax benefits only if they are held for three years.
Returns from FMPs, which come with a lock-in period and mature after a little over one year, have also come off their peaks following the reduction in interest rates. The share of FMPs, which closely resemble bank fixed deposits and invest mostly in bank CDs (certificate of deposits), in the overall assets of the mutual fund (MFs) industry has fallen from over 15% in July last year to around 8.5% now.
The assets under management of FMPs, which stood at Rs 1,54,980 crore in June 2014, plunged to Rs 1,01,141 crore at the end of April this year, data showed. “The decline in absolute yields is the main reason for the fall,” says Amit Tripathi, head, fixed income, Reliance Capital Asset Management.
Returns from FMPs, which come with a lock-in period and mature after a little over one year, have also come off their peaks following the reduction in interest rates. The share of FMPs, which closely resemble bank fixed deposits and invest mostly in bank CDs (certificate of deposits), in the overall assets of the mutual fund (MFs) industry has fallen from over 15% in July last year to around 8.5% now.
The assets under management of FMPs, which stood at Rs 1,54,980 crore in June 2014, plunged to Rs 1,01,141 crore at the end of April this year, data showed. “The decline in absolute yields is the main reason for the fall,” says Amit Tripathi, head, fixed income, Reliance Capital Asset Management.
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