ICICI Pru Fixed Maturity Plan – Series 87 (1214 Days) NFO – Should you invest?
ICICI Pru Fixed Maturity Plan – Series 87 – 1214 Days – NFO Review
ICICI Prudential AMC has come up with another Fixed Maturity Plan (FMP) Series 87 (1214 Days) Plan-A NFO that would open for subscription on 21st December, 2019. As the name indicates, this is fixed maturity plan that gets matured on a specific date. Many experts keep recommending to invest in fixed maturity plans that provide stable returns along with short term maturity. Should you invest in ICICI Pru Fixed Maturity Plan – Series 87 (1214 Days) NFO? What are the risk factors an investor should consider before investing in such fixed maturity plan schemes?
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Benefits of Fixed Maturity Plans (FMP)
Let us see the benefits of FMPs.
Issue details of ICICI Pru Fixed Maturity Plan – Plan A – Series 87 (1214 Days) NFO
This is close-ended mutual fund scheme. Means you can subscribe only during the period for which it would open and not later on.
This scheme would open for subscription on 21st December, 2019
This scheme would close for subscription on 30th December, 2019.
This scheme is available in both regular and direct plans.
This plan offers both cumulative option and dividend option.
This scheme is available only for lump sum investment.
Minimum investment is Rs 5,000 and in multiples of Rs 10 there-off for lump sum investments.
The NAV of the NFO is Rs 10 per unit now during initial subscription.
There is no entry load to invest in this mutual fund scheme.
There is no exit load on this mutual fund scheme.
This scheme is classified as moderate risk scheme.
Scheme total expense ratio (TER) is estimated at a maximum of 1% of the total assets on any day. There is additional 0.3% expenses that would be spent on gross new flows in specified cities.
Who can invest in this mutual fund scheme?
Any of the following can invest in this scheme.
1) Resident Individuals
2) Resident Indian Nationals, including partnership forms, companies, Banks, HUFs, Sole Proprietorship etc.,
4) Foreign Portfolio Investors
Who is the Fund Manager of ICICI Pru Fixed Maturity Plan – Series 87 (1214 Days) NFO?
The Fund Managers are Mr. Rahul Goswami and Mr.Rohan Maru.
What is the benchmark for this scheme?
The benchmark for this scheme is CRISIL Medium Term Debt Index.
What is the investment objective and strategy of this ICICI Pru Fixed Maturity Plan – Series 87 NFO?
The objective of the mutual fund Scheme is to generate income by investing in a portfolio of fixed income securities / debt instruments maturing on or before the maturity of the FMP scheme.
However, there can be no assurance or guarantee that the investment objective of the Scheme would be achieved.
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What is the allocation pattern in this mutual fund scheme?
This fund investment pattern is as follows:
1) It invests 80% to 100% in debt instruments including government securities. The risk profile in this segment is low to medium.
2) It invests 0% to 20% in money market instruments. The risk profile in this segment is low to medium.
Beyond this it would invest 65% to 70% in corporate NCDs that have AAA credit ratings and 30%-35% in Government securities.
Can NRI invest in this MF scheme?
Yes, they can invest in this scheme. They can invest on repatriation or non repatriation basis.
Why should you invest in this Fixed Maturity Plan (FMP) Scheme?
Here are few reasons to invest in this FMP.
1) This FMP invest in fixed income securities that has potential to generate higher returns compared to bank FDs or other FD options.
2) You would know the approx. returns if you invest in FMP. Currently it invests in corporate debt instruments + government securities where the yield works out in between 5.33% to 7.14%. Means one can expect the returns from this FMP in this range.
3) This scheme has fixed maturity after 1214 days which is approx. 3.3 years which is good for short term investors.
4) You can sell them on BSE before maturity, hence it provides liquidity option to investors.
5) There is no entry or exit load on this FMP scheme.
6) Investors in 30% tax bracket can lock their money for at least three years as returns on maturity qualify for long-term capital gains tax with indexation. The indexation benefit on sucb FMP would bring down the tax rate to single digit.
Some key risk factors you should consider before you invest in such small cap funds
One should consider some of these risk factors / negative factors before investing.
1) This FMP invests in debt instruments of corporates and government securities. Investments in corporate debt instruments have become high risk these days post NBFC crisis.
2) This scheme invests in corporate debts and in case of downgrade of ratings of such corporates, mutual fund AMC has to write-off / side pocket the amount. In such case, one can see fall in NAV.
3) Scheme invests in debt instruments and money market instruments where there is interest rate risk. There are various factors like government borrowing, inflation, economic performance due to which interest rates can fluctuate (fall or rise).
4) FMP’s generally good if you hold for entire duration of the fund till it matures. If you want to redeem early by selling on stock exchanges, you might get lower returns.
5) Investors should not assume any guaranteed returns from such FMPs.
6) Since it is a new mutual fund scheme, there is no past performance, hence we would know how the fund would perform in the future.
7) Other risk factors can be checked in the NFO Scheme Information document.
How the returns from Fixed Maturity Plans are taxed?
If you held these FMPs for less than three years and sold on stock exchanges, the proceeds from FMPs are added to the income and taxed as per the income tax slab applicable to the investor. If investments are held for more than three years (or till maturity), the returns are taxed at 20% with the indexation benefit.
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Should you invest in the ICICI Pru Fixed Maturity Plan – Series 87 (1214 Days) NFO?
Investment in ICICI Prudential FMP for 1214 days series is good for high tax bracket individuals where the post tax returns could be higher. However the returns are NOT guaranteed. There are several corporates whose credit ratings are being downgraded month on month. Since this FMP invests in AAA rated corporate debt instruments and in government securities, it is little safe game. High tax bracket individuals can invest in this scheme to get higher post tax returns. Low tax bracket individuals can give a try, but may not get higher post tax returns.
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