Till recently, investors had few choices for investing in MIPs in terms of funds' equity allocation. The most common allocation was the maximum 15 per cent. But the recent upsurge in equity markets has forced new MIPs to increase their mandate for equity investments. For instance, out of the seven MIPs launched this year, four funds – Chola MIP, DSPML Savings Plus, Reliance MIP and Sundaram MIP, have a mandate of investing 20 per cent in equities. Prior to this, FT India MIP was the only fund with such a high equity allocation mandate. JM MIP is the only fund launched in 2003, which has kept its equity exposure limit of 0-15 per cent.
IL&FS and HDFC Mutual Funds have gone a step ahead by launching MIPs that would invest upto 25 per cent in equity. More interestingly, HDFC MIP has come out with two plans – Short-term Plan and the Long-term Plan. Under the Short-term Plan, the fund's average maturity will be at the shorter end and the equity component will be limited to 0-15 per cent. On the other hand, HDFC MIP Long-term plan will keep its average maturity at the longer-end with equity exposure of 0-25 per cent.
Two more MIP from ING Vysya and Deutsche Mutual Funds are in the pipeline. These funds have also kept the stated equity allocation of 0-20 per cent. In case of ING Vysya MIP, the equity investment will be confined to S&P CNX Nifty stocks.
| ||||||||||||||||||||||||||||||||||
Apart from the normal MIP with a 20 per cent equity allocation, ING Vysya Mutual Fund is also planning to come up with a pure debt MIP with no equity allocation. However, ING Vysya is not the first fund house to introduce such a plan. In January 2002, Alliance Mutual Fund had launched the first pure debt MIP—Alliance Monthly Income Debt. However, the changed tax structure in Budget 2002-03, which made dividends from debt funds taxable in the hands of the investors made the fund inefficient. Eventually, the AMC had to wind up the fund within six months of its operation in July 2002. But with dividends being tax-free in the hands of the investor now, and a flat dividend distribution tax of 12.82 per cent is levied, ING Vysya MIP-Plan A should have a better fate than Alliance Monthly Income Debt did.
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
