Every month when AMFI (Association for Mutua Funds in India) publishes its data on the mutual market in the country, one of the less interval funds is one of the categories for which data is published.
Despite the flood of investors in mutual funds, not many are aware of this category. Let’s have a look at what these are and who are they fit for?
Interval funds: Why the name?
Interval funds are quite a class apart since the money pooled in can be invested in both and debt instruments or any one of them. However, what really distinguishes these is the fact that these can be bought or sold only during specific time intervals, which justifies its name.
In a sense, they are also similar to close-ended funds which don’t permit one to buy/sell units frequently, thereby impacting liquidity.
Many experts point out that interval funds are somewhat of a combination of open-ended and close-ended funds. There are not many schemes in the market in this category. But some might be listed on the stock exchange.
Important AMCs offering interval fund
Some of the funds in this category in the market are offered by Aditya Birla Sun Life Interval Income Fund, Nippon India Interval Fund and UTI Annual Interval Fund.
For the fund manager it offers a large degree of comfort since he/she can craft an investment strategy without bothering about redemptions.
Those seeking unconventional assets
Some investors look for unconventional assets. Interval funds can be a choice for them. If you are an investor with low-to-moderate risk appetite and also have short-term goals, this can be a fund you can explore.
The returns for interval funds are usually between 6% and 8% in 5-year periods.
Income Tax treatment
There are no clear cut answers on the way income tax is applicable on interval funds. It depends on the share of investment the fund manager makes in debt and equity. If he/she invests more than 65% of the pooled amount in equity and/or equity-related instruments, it would be labelled as an equity fund to calculate taxes.
If the share is more than 65% in debt instruments, it is treated as a debt fund.
Liquidity concerns
The lack of liquidity is one shortcoming that prevents many from opting from interval funds. Buying and selling during specific time periods, which is at the discretion of the AMC (asset management company) prevents one from redeeming units during any crisis, no matter how severe.
In any case, it is always prudent to consult a qualified investment advisor before choosing funds to put your money in.
(Disclaimer: This article is only meant to provide information. News9live.com does not recommend buying or selling shares or subscriptions of any IPO and Mutual Funds.)
Interval funds is a unique type of mutual fund that can invest both in equity and debt. They are also open for investment for specific time windows. Personal Finance Business News – Personal Finance News, Share Market News, BSE/NSE News, Stock Exchange News Today
