Investors prefer target maturity index funds to fixed maturity plans

Lower interest rate risk and predictable returns key attractions

Target maturity index funds — passive investment vehicles for debt investments — have emerged as an alternative to fixed maturity plans (FMPs), close-ended debt mutual fund schemes hugely popular until a few years ago. The relatively lower interest rate risk, coupled with stable and predictable returns, has been attracting investors.

In recent weeks, fund houses, including ICICI Prudential MF, Aditya Birla Sun Life MF, and Edelweiss MF, have launched such target maturity funds. 

Like other passive funds, target maturity index funds replicate the composition of the underlying index and have specific maturity dates aligned to the expiry date of underlying