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Fixed Maturity Plans: Keep the moolah coming!

I hate to be cynical, but you have got to hand it to Indian mutual funds & their distributors - what they may lack in investing skills, they more than make up in marketing skills. Here’s what Business Standard has to say on Fixed Maturity Plans (FMPs) and their rapid growth:

Investment schemes with safer returns are gaining attention of retail investors, as the ongoing correction and volatility in the markets coupled with hardening deposit rates . . .

Mutual fund houses do not want to miss the bus at a time when investors are showing their preference for safer products.

Since January, the MFs launched around 200 FMPs and mopped up around Rs 23,154 crore in just two months. The funds’ total collections in the whole of last year were Rs 89,688.90 crore from 304 FMPs.

OK, so let’s do the math for this “asset base” of 23k crores:

  • Average expense ratio of say 0.25% tranlates to 50 crores for the fund houses (managers).
  • Average (entry + exit) loads of say 3% translate to another 690 crores, split between the mutual funds and their distributors.

Not a bad “return on investment” for rapidly launching 200 FMPs, eh? Of course, as far as FMP investors go, their returns may barely beat those on FDs!

This entry was posted on Friday, March 30th, 2007 at 4:03 pm and is filed under investing. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.

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    5 Responses to “Fixed Maturity Plans: Keep the moolah coming!”

    1. Nikhil Says:
      March 30th, 2007 at 4:26 pm

      MIP is better than FMP. Entry load is 0 and exit load is 0.5 if exited before 6 months and 0 if later. Double indexation is also available for MIPs. Only catch is volatile Equity component and type of Debt holding, in MIPs.

    2. Ananth Says:
      March 30th, 2007 at 5:45 pm

      I am not sure if all FMP’s have such high loads, I invested in 3 month reliance FMP with no entry or exit loads, premature exit had a small exit load though.

    3. Falkor Says:
      March 30th, 2007 at 11:14 pm

      Hey, with every post your site is just getting better!

      A well planned FD investment will always beat FMP. I agree with Nikhil, for regular inflows, MIP is better. For a fixed period investments, FD are better.

      May be the figures quoted above has a large skew becoz of corporates’ investments in FMP.

    4. Nikhil Says:
      March 31st, 2007 at 2:46 am

      Corporate investments play a big role in FMPs. Only recently retail has taken an interest in FMPS. As an Institutional investor you have to invest minimum 5 crores but you get higher yield than retail. Incidently Sundaram FMP (institutional plan) gave 24% return last year, better than equity funds.

    5. ashu Says:
      April 1st, 2008 at 10:43 am

      so hum buddhu bangaye fmp mein invest karke!