Prajna Capital - An Investment Guide

An Equity-linked Fixed Maturity Plan is a debt fund which intends to invest primarily in the bonds issued by the corporate, banks, non-banking financial institutions, etc. These bonds are generally zero coupon bonds whose returns are set with the returns of underlying assets (e.g. group of stock or index) they choose. There is no fixed coupon rate, instead a participation ratio is fixed and on that ratio, the return is generated. The participation ratio is the fixed proportion of upside in the underlying asset that the investor is entitled to get. But here’s a catch, there is a cap on the upside known as knockout level. That is, if the value of the underlying asset reaches or exceeds a pre-determined level the investor will just get a fixed rate of return. Birla Sun Life Mutual Fund is introducing two Equity linked FMP schemes, Series-A (Aviator Plan) with maturity of 36 months and Series-B (Gladiator Plan) with maturity of 21 months. The participation ratio of Aviator & Gladiator ...