Debt FundsGROUP MEMBERS

AMIT JOSHIANIL KUMAR

AVDHESH RAJPUTNIKHIL GUPTA

NILESH KUMARRAHUL SOODEY

RISHAP KUNDRA

TOPIC

PRESENTATION

Brief History Mutual  Funds In India (1964 - 2000)o Started with the commencement of UTI in JULY 1964.o Monopoly of UTI broke in 1987 owing to the entry of SBI along with

LIC & GIC later.o Fast growth rate , of about 27%, rising from 25 crores to 90000

crores.o Year 1999 is considered as a milestone year for mutual funds industry

because of entry of private players.

What are Debt Funds? An investment pool, such as a mutual fund or

exchange-traded fund, in which core holdings are fixed income investments.

A debt fund may invest in short-term or long-term bonds, securitized products, money market instruments or floating rate debt.

The fee ratios on debt funds are lower, on average, than equity funds because the overall management costs are lower.

In order to ensure regular income to investors debt funds distribute large fraction of there surplus to investors.

The NAVs of such funds are affected because of change in interest rates in the country.

Returns through interest earnings and trading of securities in secondary market .

Why debt funds? There are several reasons why one should look at debt

as an asset class to invest in. Some of the main reasons are: Need to balance risk and return - The Risk/Return

Tradeoff . Need to diversify - Portfolio Diversification and Asset

Allocation. Need for Tax Planning.

Types of Debt Funds

Diversified Debt funds

Focused Debt Funds

High Yield Debt Funds

Assured Return Funds

Fix Term Plan Series

Based on Different Investment Objectives, there can be following types of Debt Funds :

:- DIVERSIFIED DEBT FUNDS:- Focused Debt Funds.:- High Yield Debt Funds.:- Assured Return Funds.:- Fixed Term Plan Series.

DIVERSIFIED DEBT FUNDS

Invest in all securities issued by entities belonging to all sectors of market.

Investments are properly diversified into all sectors which results in risk reduction

Any loss incurred, on account of debt issuer, is shared by all investors further reducing the risk.

Focused Debt Funds Narrow focus funds more confined to investments

in certain selected industries of specific sectors or industry or origin.

Because of there narrow orientation they are more risky as compared with diversified debt funds.

High Yield Debt Funds These funds prefer securities issued by those

issuers that are considered to be of “below investment grade”

Sole motive is to earn higher interest returns from these issuers.

More volatile and bear higher default risk. Although they may earn at times higher returns

from investors.

Assured Return Funds Funds that come with a locking period and

offer assurance of annual return to investors during the lock-in period.

It provides low risk & safe guard the interest of the investors.

SEBI permits assured returns to those funds who has adequate net worth to guarantee returns in the future.

Fixed Term Plan Series Usually are closed ended schemes having short term

maturity periods.

Offers a series of plans and issue units to investors at regular intervals.

Not listed in exchanges.

Main objective is to gratify investors by generating expected returns in short duration of time.

To Summarise, Why One Should invest in debt funds ?

Offers all benefits associated with mutual funds in general. Like : Transparency in operation. : Professional management. : Diversification. : Liquidity. : Convenience & Low cost. They are towards lower ends of risk spectrum.

Provide an alternative for diversification of one’s portfolio.

More predictable performance in comparison with equity as an asset class. Offers tax benefits.

Better investment avenue in terms of tax return

Dividend/interest

Short term capital gains (holding period <1 year)

Long term capital gains (holding period >=1 year)

Maximum amount that can be invested

Lock-in-period

Debt mutual funds Tax free in hands of investors

Taxable as par relevant tax slab

10% without cost inflation

No limit Not applicable

PPF Tax free Not applicable Not applicable Rs 70000 15 years

Bonds notified u/s 54 EC

Taxable as par relevant tax slab

Taxable as par relevant tax slab

20% without cost inflation index benefit

No limit 3 years

6.5 % saving bonds Taxable as par relevant tax slab

Not applicable Not applicable No limit 6 years

KVP Taxable as par relevant tax slab

Not applicable Not applicable No limit 2.5 years

Bank FD Taxable as par relevant tax slab

Not applicable Not applicable No limit variable

NSC Taxable as par relevant tax slab

Not applicable Not applicable No limit 6 years

Practical schemeName of scheme HSBC Flexi Debt Fund

Investment objective To deliver returns in the form of interest income and capital gains, along with high liquidity, commensurate with the current view on the markets & interest rate cycle, through active investment in debt & money market instruments

Plan/options Regular & Institutional option

Sub options Regular & Institutional :Fortnightly,Montly, Quarterly & half yearly dividend(payout /reinvestment) & growth sub option

Dividends Declaration of dividends & its frequency will inter alia depend upon the distributable surplus

Minimum application amount

Regular : Rs 10000 per applicationInstitutional : Rs 5,000,000 per application

Minimum additional investment

Rs 1000 & multiples of Re 1 for regular option, Rs 10000 & multiples of Rs 10000 thereafter for institutional option.

Minimum redemption amount

Regular Rs 1000 & multiples of Re 1 there after.

Bench mark index CRISIL Composite Bond Fund Index

Loads Entry Load : NILExit load :0.75% in regular option

Liquidity/ ongoing subscription

Purchased /redeemed on every business day at NAV prices

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