India’s asset managers are actively launching fixed-maturity plans this year amid higher government bond yields.
Fixed maturity plans are closed-end funds with a lock-in period. Investors are paid annual, half-yearly or quarterly coupons or dividends depending on the terms set out in the prospectus.
Data from the Securities and Exchange Board of India (Sebi) show that fund management companies have filed six draft prospectuses for fixed-maturity plans in the first quarter of 2021. Three have already been launched, compared with just two in all of 2020.
The increase this year is partly due to higher bond yields, according to a fund manager with a Mumbai-based asset management company.
“These fixed-maturity plans mainly invest in corporate and sovereign bonds. So, when yields are on the rise, investors’ appetite for defensive assets will also increase. I expect the trend to continue for the most part of this year,” the Singapore-based manager tells Asia Asset Management, speaking on condition of anonymity.
The Indian ten-year government bond yield rose from 5.89% on January 1 to more than 6.17% as of end-March 2021.