ICICI Prudential Fixed Maturity Plan - Series 88 - 1858 Days Plan D (A Close – Ended Debt Scheme. A relatively high interest rate risk & relatively low credit risk)

From ICICI PRUDENTIAL MUTUAL FUND Fixed Maturity Plan (FMP) is a fixed tenure mutual fund scheme that invests its corpus in debt instruments maturing in line with the tenure of the scheme. The tenure of an FMP can vary between a few months to a few years. FMPs are ideal for those investors, who need returns higher than a regular FD but can accept the frequent NAV fluctuations. Compared to equity funds, FMPs are low risk-low return investments.  INVESTMENT OBJECTIVE The investment objective of the Scheme is to seek to generate income by investing in a portfolio of fixed income securities/debt instruments maturing on or before the maturity of the Scheme. However, there can be no assurance or guarantee that the investment objective of the Scheme would be achieved. BENCHMARK PLAN AND ASSET ALLOCATION PROS FMPs can offer many benefits to investors, some of these are: Tax-Efficient post 3-years The indexation benefit offered by FMPs makes these investments highly tax-efficient for investors. This, however, is true only for investors who stay invested for more than 3-years. Stability FMP investments are locked in for a pre-decided duration. Thus, the investment goes through various market movements. This allows the fund performance to stabilise over time. FMPs are often minimally affected by market movements. Limited Risk Although FMPs are not risk-free, the risk level is low, especially as compared to investment types like equity mutual funds. Since investors have to remain invested until maturity, interest volatility is often negligible. CONS FMPs have certain limitations, and investors must know these before finalising their investment. Listed here are some of them: Limited Liquidity: Since FMPs do not allow redemption of scheme units before maturity of the scheme, these offer low liquidity to investors. Investors who wish to redeem their FMP investments before maturity can do so via the stock exchange on which the scheme is listed. It is mandatory for investors to have a Demat account in case they wish to make redemptions through stock exchanges. Locked-In Rates: Although locked-in rates can benefit during a drop in interest rates, it can turn into a problem when interest rates rise. As interest rates move upwards and rates on the fund are locked in, it can result in missed opportunities to gain higher returns combined with potentially lower risk levels. No Guaranteed Returns: Fixed Maturity Plans offer the benefit of locked-in returns until maturity and high-quality investments made by the funds can help in minimizing the credit risk. However, the potentially lower risk does not mean that there is no risk for investors since FMP returns are still market driven. Thus, no FMP fund can guarantee returns unlike many fixed return instruments like fixed deposits. BENCHMARK PERFORMANCE Who should invest in this scheme ? Considering the current monetary policy condition in world economy when inflation is rising, unemployment has gone below 5 % , economies are on path of growth and interest hikes by central banks are expected lines. If you have sufficient liquidity and if you don’t want to take risk of investment in capital markets then this is right time to invest in FMPs. In long term this scheme won’t be able to give inflation beating returns considering its historical performances therefore all factors should be considered before investing. KEY WORDS Fixed yields, indexation, NAV fluctuations, liquidity.