Rare mutual fund schemes

Kayezad E. Adajania :Mint :Thu, Nov 29 2012. 10 51 AM IST

There are a few MF schemes that are unique but not necessarily investment-worthy

The Indian mutual funds (MF) industry boasts of a few MF schemes that are unique but not necessarily investment-worthy. Here are some of them.

Unit-linked insurance plans

Before the market got flooded in the past five to 10 years with investment schemes that come bundled with insurance covers from insurance companies, two fund houses had already offered unit-linked insurance schemes. While LIC Nomura Asset Management Co. Ltd offers LIC Nomura MF Unit Linked Insurance Scheme (ULIS), UTI Asset Management Co. Ltd offers UTI – Unit Linked Insurance Plan (UTI-ULIP).

UTI-ULIP is a debt-oriented scheme that invests at least 60% in debt markets. ULIS is an equity-oriented scheme that invests at least 65% in equity markets. Keeping the exact contours of each of these schemes aside, the entry age in these schemes is 12-60 years. You invest a sum in these plans every year, out of which a small portion gets deducted towards your insurance cover and the rest gets invested. If the first unitholder dies during the scheme’s tenor, the second unitholder or the nominee gets the amount back at the prevailing net asset value (NAV) as well as the insurance claim.

Both the schemes are legacy products, launched more than 10 years ago. Due to the turf war between the capital market regulator, Securities and Exchange Board of India (Sebi), and the Insurance Regulatory Development Authority (Irda), it has been tough for fund houses to launch such schemes.

Pension plans

At present, only two fund houses—Franklin Templeton (Templeton India Pension Plan) and UTI AMC (UTI Retirement Benefit Pension Fund)—offer these plans. These schemes invest up to 40% in equities and the rest in debt. Just like MF Ulips, they too offer tax benefits under section 80C at the time of investment. Typically, once you cross an age threshold, usually 58 years of age, you can either withdraw your full amount or choose to get regular pension in the form of dividends or systematically withdrawal of accumulated units. Lately, Sebi has encouraged MFs to launch pension-type products. In June 2012, Reliance Asset Management Co. Ltd filed a draft offer document of a pension-type plan called Reliance Retirement Fund.

PE ratio FOF

Although there are a few schemes that switch between equity and debt, there is only one fund of funds (FoF) scheme that switches, instead, between one equity scheme and one debt scheme. Called FT India Dynamic PE Ratio Fund of Funds (FTDPEF), the scheme switches between the fund house’s own Franklin India Bluechip fund and Templeton India Income Fund. So far, the fund has a good track record and is a part of Mint50.