Interval funds are a special type of mutual fund. As the name indicates, it enables investors to sell units back to the fund at specific intervals. But these are not close-ended funds since their units are not generally transacted in the secondary market. While some features of these funds are like open-ended funds, some are like close-ended ones.
Investors cannot engage in buying and selling these funds whenever they want – they can do so only when the funds house shows them to green light to do so. However, during that period when they are permitted, the units are brought and sold according to their NAV (Net Asset Value).
Higher fees
Interval funds typically offer to repurchase shares once in three months (quarterly), once in 6 months (semiannually) and once in 12 months (annually). Usually, interval funds carry higher fees than open-ended mutual funds and feature operating expenses, servicing fee and sales charge.
Some of India’s most prominent AMCs offer interval funds. Among them are Nippon, HDFC, Aditya Birla Sun Life, Kotak, Taurus, ICICI Prudential, LIC MF, IDFC and UTI.
Net AUM in August 2024
According to the AMFI (Association of Mutual Funds in India) data for August 2024, there were 12 interval mutual fund schemes in total and the average net AUM cumulatively stood at Rs 174.91 crore. Moreover, there were only 2,352 interval fund folios in the country in August.
Range of returns
In a report published this week, it was mentioned that the 1-year returns of interval funds varied between 5.95% and 7.49%, over a 2-year period it varied between 6.22% and 7.3%, over 3 years it ranged between 5.48% and 6.96% while for a 5-year window it varied between 4.71% and 5.88%.
Some experts say that interval funds offer an opportunity for investors to explore assets which are not common such as those not listed on exchanges. They typically invest in debt instruments and commercial property. Therefore, interval funds are usually considered appropriate for conservative investors.
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