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Interval Funds

What are Interval Funds?

Interval funds are a type of mutual fund, where the units can be purchased or sold during a particular predetermined time period only. They may invest in both debt and equity securities, but they are mostly observed to park money in debt instruments. Interval schemes combine the features of closed-end funds and open-ended funds. The units may be traded on the stock exchange or may be open for sale or redemption during pre-decided periods at NAV-related prices.

Features of Interval Funds

The features of interval funds are as under:

  • Interval funds are best-suited for individuals seeking short-term returns.
  • They are highly illiquid in nature, given that their units can only be redeemed at specified time intervals.
  • Investments are typically made in debt securities, and therefore the risk associated is low.
  • The expense ratio of interval schemes is generally more than other kinds of mutual funds.
  • Taxation is based on the quantum of investments in debt or equity.

Benefits of Interval Funds

The benefits associated with interval funds are as follows:

  • The returns on interval funds are often more than that of open-ended mutual funds.
  • Retail investors will be provided access to institutional-grade alternative investments with low minimums.
  • Periodic offers may be made by the fund to the investor to repurchase shares at NAV.

How do Interval Funds Work?

Interval schemes are quite similar to fixed maturity plans. The investor’s money remains invested for a fixed period of time, and the investment cannot be redeemed prior to the maturity date. The fund manager thus gets the opportunity to set a robust investment strategy in place, without having to worry about redemption requests and liquidity. He or she will allocate the investor’s money in securities for a term that suits the fund’s maturity.

Who should One Invest in Interval Funds?

Interval schemes typically invest in illiquid assets, and are best-suited for entities looking for unconventional assets. Investments are generally made in assets like forestry tracts, commercial property and business loans, among others. Investors with short-term financial goals and low-to-moderate risk tolerance are often advised this route for wealth creation.

List of Interval Schemes in India

Some of the interval schemes available in the market include:

  • Aditya Birla Sun Life Quarterly Interval Fund - Series IV-Direct Plan (G)
  • IDFC Yearly Series Interval Fund - Series I (G)
  • Kotak Quarterly Interval Fund - Series I - Direct Plan (D)
  • Axis Yearly Interval Fund - Series 1 - Regular Plan (G)
  • Taurus Quarterly Interval Fund Series 1 (G)
  • HDFC Quarterly Interval Fund - Plan A - Retail Plan (G)
  • LIC MF Interval Fund - Annual Plan - Series 1 (G)
  • ICICI Prudential Interval Fund II - Quarterly Interval Plan - A Retail (QD)
  • Aditya Birla Sun Life Quarterly Interval Fund - Series IV (G)
  • Sahara Interval Fund - Quarterly Plan - Series 1 (D)
  • ICICI Prudential Interval Fund - Annual Interval Plan I - Direct Plan (D)