Mutual funds come in all shapes and sizes. The Securities and Exchange Board of India (SEBI) has classified various financial products to help investors make informed decisions. These divisions are made depending on the type of assets the plan invests in, the length of the investment period, etc. Open-ended investments, closed-ended investments, and interval funds are examples of this kind of categorization. We shall discuss the various interval fund types in India.
Defining interval funds
An interval fund may invest in equities, debt, or securities. The units of these funds can only be bought and redeemed at a specific window of time. The fund company announces these for shareholders to sell and purchase units. They are comparable to closed-ended funds as you cannot buy or redeem units often.
The following are some of the advantages of interval funds:
- Frequently, the profits on interval funds exceed those of open-ended investment options.
- Low-minimum alternative institutional-quality investments will be available to retail investors.
- The fund may, from time to time, make investor proposals to repurchase assets at NAV.
How does an interval fund work?
An interval fund is a great combination of open-ended and closed-ended funds. Some plans may also be traded on the stock market. Investors can purchase and sell units at the current NAV at a specified time. The fund manager can devise a sound investment plan without being concerned about outflows and liquidity since the financial institution sets the redemption period.
Who should invest in an interval mutual fund?
These special funds are perfect for investors seeking unique assets since they invest in illiquid assets. Besides, they are suitable for investors with modest to low tolerance for risk and short-term financial goals. Investments in non-traditional assets, including commercial real estate, forestry tracts, company loans, etc., are common for interval funds.
Features of an interval fund
The following are some of the salient features of interval mutual funds sold in India.
Risks and returns
The interval investment shares are highly illiquid since you can only redeem them during specific time intervals. Therefore, even if you are prepared to pay the exit load during an emergency, you cannot reclaim the units. Additionally, no marketplace is permitted to sell these funds’ unit units.
Interval funds usually generate profits over five years in the region of 6-8 percent. The rewards are significantly smaller for shorter periods.
Invest according to your investment plan
You can enroll in the fund to generate short-term gains if your investment portfolio coincides with its maturity date. Although interval funds can invest in stocks and bonds, most plans focus on debt. Moreover, as it gives comparatively lower returns, it is suitable for those with lesser risk tolerance.
The percentage of funds invested by the plan in equity and debt determines the taxation for interval mutual funds. For tax purposes, the fund is regarded as an asset manager if it invests at least 65% of its asset value in equities and equity-related products.
On the other hand, the fund is regarded as funds invested for taxation purposes if at least 65% of its asset value is invested in debt instruments. To learn about the tax rates, read the offers online and look at the investment portfolio the scheme intends to use.
List of interval funds in India
Here is a comparison of interval investments in India based on their performance over the years. Remember that it is just a survey of India’s top funds in this category, not a suggestion to invest in those funds. Please do your research and take an informed decision based on your risk tolerance and financial goals.
|Name of the scheme
|% returns in 1 year
|% returns in 2 years
|% returns in 3 years
|IDFC Yearly Series Interval Fund – Series II
|Reliance Yearly Interval Fund – Series I – Growth
|Reliance Interval Fund – Annual – Series I – Retail Growth
|Reliance Interval Fund – Quarterly – Series II – Retail Growth
|UTI Fixed Interval Income Fund – Annual Interval Plan – Series IV – Growth
While interval funds offer better rates than traditional mutual funds, they also have higher costs and less liquidity. Interval funds may be beneficial if an individual does not require funds immediately.
How do I buy interval funds?
Fund houses make interval fund units available daily at the current net asset value. Shares may only be available to authorized investors as per the fund’s rules.
Are interval funds a good investment?
While interval funds offer better rates than traditional mutual funds, they also have higher costs and less liquidity. These funds may be beneficial if an individual does not require stability and the profits outweigh the expenses, especially compared to traditional funds.
Is an interval fund a hedge fund?
Both interval and hedge fund managers can provide exposure to investment options, which are investments beyond the range of regularly traded assets such as stocks and bonds, including gold, property investment, and long-term debt. However, interval funds are a significantly smaller investing segment than hedge funds.
What is an example of an interval fund?
An example of an interval fund is the Pimco Flexible Credit Income Fund, which invests in a range of credit instruments and does not trade publicly.
Are interval funds a good investment?
Interval funds can offer higher returns by investing in illiquid assets like private equity. However, they come with higher fees and lack liquidity, making them suitable for certain investors.
What is an example of an interval scheme?
An example of an interval scheme is the HDFC Interval Fund, which bridges the gap between open-ended and closed-ended funds, allowing transactions only at specific intervals.
What is a funding interval?
A funding interval refers to the specific time periods during which an interval fund allows investors to purchase or redeem shares, typically occurring at regular intervals.