Retail investors get attracted to FMPs as interest rates rise and equity markets turn volatile; FMP collections in 2010 crossed Rs 72,601 crore from Rs 10,502 a year ago.
Fixed maturity plans (FMPs) are becoming popular among retail investors amid rising interest rates and volatile equity markets.
The number of FMPs launched and subscriptions received in 2010 were several times higher than the 2009 levels. A total of 288 FMPs were launched in 2010 against 53 in 2009. The funds mobilised through FMPs in 2010 was Rs 72,601 crore against just Rs 10,502 crore a year earlier, according to Morningstar data.
The response to FMPs from retail investors has surprised fund houses too. “We recently collected investments in FMPs from around 10,000 investors. A year ago, we were not even expecting more than 100 investors,” said R S Srinivas Jain, Senior Vice President and Chief Marketing Officer, SBI Mutual Fund.
Asset management companies are selling hard FMPs to retail investors and interest of distributors in the debt product has also resulted in higher investments by retail investors.
In the last few months many FMPs were launched by fund houses. More FMPs are in the pipeline with fund houses having filed offer documents with Sebi. In January itself, fund houses have filed offer documents for nine FMPs.
The rising retail interest in FMPs has coincided with rising interest rates. Fund managers said FMPs are giving a return of around 9.5 per cent for one year period. About one year ago, FMPs yields were around 6.5 per cent for similar period.
Jain of SBI Mutual Fund said, “Fixed income is undersold. It needs to be sold aggressively. Whether it is the bond fund or a g-sec fund or an FMP, these products are not properly appreciated by retail investors.”
Industry estimates put FMP assets to have crossed Rs 1,00,000 crore, a level last experienced in 2007. Increasing awareness about the tax efficiency of investing in debt mutual funds has also helped mutual funds in selling FMPs.