Time Frame Closed - ended hybrid schemes have an investment time frame of 36 to 60 months Methodolgy These funds invest in a mix of debt and equity in a way to ensure that the debt component is enough to preserve the capital even if the market crashes Example In case of a closed ended fund for 36 months, fund manager invest around 80% in bonds that mature in line with the scheme’s life. Safety of Capital This ensures return of capital invested at the end of the tenure. The balanced is invested in equity for the returns kicker. Liquidity And Tax Impact A hybrid scheme investor should learn to live with an illiquid investment and tax impact. Traditionally such schemes are expected to beat post tax returns offered by fixed deposits without risk in capital. The schemes are treated as debt funds for the purpose of taxation.
Indica Investments has incisive research study in selecting Bond Funds according to the customer’s investment horizon on the basis of Interest Rates movements. It helps its client in shifting short term debt Bond fund into long term debt funds as soon as it feels that the yields may weaken once interest rates starts trending down and vis a versa, thereby enabling its clients to beat inflation adjusted returns.
Arbitrage Funds are very popular as they are considered to be good alternatives to FMPs and Bank FDs. The Arbitrage Funds carry the tag of lowest risk with return ranging 8-9% p.a. but carry the tax efficiency status of Equity oriented Mutual Funds i.e. 15% is applicable on Short-Term Gain with holding period less than a year & completely Tax Free on Long - Term Capital Gains upto Rs.1 lakh per year if holding period is more than a year.
Banks do not provide any return on the balances maintained by corporate bodies in their current accounts. Indica Investments has a solution for this. We park the short term funds into liquid funds of Mutual Fund Houses like HDFC, ICICI, Reliance, SBI, UTI etc. These funds provide returns in the form of dividends on regular intervals which are not taxed in the hands of the holder. Corporate Clients can generate returns from 7% tax free by parking surpluses in liquid funds.