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Target Maturity Index Funds are passive investments in debt securities that aims to replicate the composition of the underlying index and have a specified maturity date.
Target Maturity debt funds differentiates itself from open ended normal mutual funds by having a roll down approach with fixed maturity date making potential returns visible for investor.
*Please note the predictability of return doesn’t imply guaranteed return or protection of principal. Investments are still subject to credit and market risk. Further, returns will be potentially visible only if the investor continues to hold it till the maturity.
Investor buys/sell units of index fund from AMC
The proceeds from fund are deployed by Fund Manager
The funds are invested using risk/replication complying with SEBI norms
On maturity of the fund, proceeds are distributed among unit holders as per units held
Investors holding units till maturity may see returns closer to indicative yield at the time of investment*
The Fund will replicate the index using risk/replication strategy in which it will match the duration and
other risk parameter as per SEBI guidelines.
Under risk replication the fund manager aims to keep the duration of the fund within stated range by buying the securities first available in the index. However in case of nonavailability of security in the index, the fund manager may buy similar risk profile matching other securities. *Please note the predictability of return doesn’t imply guaranteed return or protection of principal. Investments are still subject to credit and market risk. Further, returns will be potentially visible only if the investor continues to hold it till the maturity.
Target Maturity Funds provides features of several traditional fixed income investments.
*Please note the predictability of return doesn’t imply guaranteed return or protection of principal. Investment are still subject to credit and market risks. Further, returns will be potentially visible only if the investor continues to hold it till the maturity. **Diversification for Target maturity funds would depend on the underlying Index. If the underlying Index is investing only in G-Sec then there is no diversification.
Target Maturity debt products tend to generate relatively higher post tax returns vis-à-vis traditional fixed
income investment and tax-free bonds.
Pre tax return/yield are as on 30th Sep 2022, For traditional investment horizon SBI domestic term deposit for non senior citizen up to 2 Cr is used. *Traditional tax rate investment assumed at the marginal rate of 30%. ** Long Term capital gain of 20% applied with indexation benefit. This above computation is merely for illustration purpose and please consult your tax advisor for any investment . Tax-free bond yield is based on NABARD 7.04% Mar 2026 Tax-free bond.
Target maturity funds aim to offer investors reasonable visibility of return based on yield at the time of investment, provided that they stay till maturity of the fund*.
Yields in the bond market are relatively quick to reflect the market condition and compensate investor accordingly, whereas the interest rate on fixed deposit may not increase adequately within stipulated time.
Lack of tax-efficiency results in poor after tax return for investor in investment such as Fixed Deposits.
No lock-in like Fixed Maturity Plans (FMP). Investor has the option to subscribe or redeem anytime during the lifecycle of the fund**
Tracks an index providing visibility to the underlying portfolio constituents.
The credit risk associated in the target maturity fund will depend upon the underlying constituents. Further, interest rate risk will continue to impact the target maturity fund for investor exiting before the maturity of the fund.
Please note that the visibility of return doesn’t imply guaranteed return or protection of principal. Investment are still subject to credit and market risks. Further, returns will be potentially visible only if the investor continues to hold it till the maturity. **This will depend on the last date for registration of fresh request for STP /SIP/SWP. Please consult your tax advisor for any taxation impact on your investment. Past performance may or may not sustain in future