what is the problem that is being faced by fixed maturity
plans today?
Answer Posted / neha verma
Fixed Maturity Plans: Fixed maturity plans are investment
schemes floated by mutual funds and are close-ended with a
maturity period ranging from three months to five years.
These plans are predominantly debt-oriented, while some of
them may have a small equity component.
The objective of such a scheme is to generate steady
returns over a fixed-maturity period and immunising the
investor against market fluctuations.
During the meltdown, the fixed mutual funds had to bear
very heavy withdrawals due to panic among investors.
90 per cent of the assets the mutual funds has bought were
rated AAA, or P1 plus, depending on whether they were long
term or short term assets.
But in the coming months these MFs will face huge
redemptions, leading to a problem again.
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