Prudential-ICICI Mutual Fund has launched a new fund targeted at children -- Prudential-ICICI Child Care Plan. The fund opens for subscription on July 16, 2001. It's an open-end fund, which provides regular investment every month or quarter, and comes in two flavours -- Study Plan and Gift Plan to suit varying needs. The portfolio of the two plans will also be managed separately.
Study Plan is aimed at providing steady income through a fixed income portfolio with limited allocation to equities. The equity allocation of the plan will not go beyond 15 per cent, somewhat similar to an open-end Monthly Income Plan. This plan is suited for an investor seeking regular income for his child education now or for immediate future.
Gift Plan is aimed at building a corpus to take care of child's cost of education in future. The plans will primarily invest in a mix of equities and fixed income securities, with a tilt towards equities. This allocation is likely to generate steady returns over a longer time frame. The plan is suited for parents seeking to build a education fund for their kids.
The beneficiary child will also be eligible for scholarship of Rs 1 lakh on attaining 18 years of age and on securing admission in a recognised college or university. For this the AMC will set up Prudential-ICICI Young Student's Education Trust and contribute 0.10 percent of the average net asset of the fund. Hence, the number of scholarship will depend on the amount mobilised and the performance of the fund thereafter. The fund also provides for accidental insurance coverage of 10 times the face value of units.
The Study Plan fund carries an entry charge of 1.5%, i.e. for every investment of Rs 1000, you get units only worth Rs. 985. Whereas Monthly Income Plans (MIPs) do not charge a load. The Gift Plan carries a higher charge of 2.5 per cent as against the average load of 1.75% charged by a Balanced Fund.
Most other children benefit funds do not allow redemption untill the beneficiary turns major. But Prudential-ICICI Child Care Plan does not constraint redemption anytime. However, the fund levies a steep exit charge 2.50% for redemption within three years and 1% for redemption before the beneficiary turns major.
The fund is attractively packaged alternative for building a fund for your child's education. The fund also provides superior liquidity with relaxed redemption eligibility. However, the fund compares unfavorably with its peers in terms of participation cost i.e. entry load.