Mutual fund unlocked: Closed-ended fixed income mutual funds

Being a mutual fund investor, one should always know the investment avenues available in the mutual fund industry. India mutual fund industry has a vast choice of options available with different mutual fund houses for every type of investor.

Closed-ended hybrid debt options include capital-protection oriented schemes and dual advantage schemes. These schemes invest majorly in debt instruments and some amounts in equity. These debt-oriented closed-ended schemes are therefore different from FMPs. Let us have a look at these schemes and how they work.

These debt-oriented closed-end funds are  open for subscription only during the NFO period and poses all the basic features of the closed ended equity funds.

Debt-oriented closed-ended funds are either purely debt or with some exposure to equities. The pure-debt funds are Fixed Maturity Plans (FMPs) and Fixed Term Plans (FTPs) whereas Hybrid closed-ended funds comprise of interval funds, Capital Protection Oriented Funds (CPOF) and Dual Advantage funds.

Fixed maturity plans are debt fund schemes which have a fixed maturity horizon. This maturity horizon can vary from three months to five years. These funds invest across money market instruments, certificate of deposits, commercial paper, corporate debt and government bonds, depending on its maturity and its respective investment strategy and goal. These funds hold these instruments to collect the interest due on them, which is known as accrual.