Big-Ticket Investors Flock To Monthly Plans

The monthly income plans (MIPs) are seeing higher inflows over the last one month with most of the subscriptions coming from high net-worth individuals (HNIs) while corporates are also sitting up and taking interest.

So far, the MIPs have been seen as an investment vehicle for the retail segment as it offers steady and regular returns. However, the recent announcements in the budget with regard to dividend tax coupled with the fact the normal debt schemes are yielding negative returns is leading to a situation where big ticket investors are turning to alternative schemes such as MIPs. The mutual fund sector is now pulling out all stops to woo corporates to put their money into MIPs.

 

The MIPs generally offer returns which are 100 basis points higher than other debt schemes. The gap has now widened to 150 basis points and this kind of a return is attracting the large investors. Vikas Sachdeva, head of sales and distribution at Birla Sun Life Mutual Fund, said that so far it was the medium and small corporates who were subscribing, "but we hope to get some of the bigger fish to bite".

Birla Sun Life is plugging MIPs to HNIs on the attractiveness of the regular withdrawal plan while to corporates it is positioning it as a bond fund spiked with equity to add that extra edge. Typically, MIPs have around 10 per cent equity in their portfolios, which -- if managed and churned well -- boosts the returns of such schemes. Other fund houses are also realising the opportunities and are aggressively selling MIPs to the corporates and hoping that they will rise to the bait.

Sandesh Kirkire, debt fund manager with Kotak Mahindra Mutual Fund, said that one of the reasons for the shift in preferences to MIPs from other debt funds is the diminishing returns from the latter. In January, the returns were more than 10 per cent; in February the returns dropped to around 7.5 per cent while in May the returns have become negative.

A fund manager with Unit Trust of India said that investors have been pulling out money out of gilt schemes and putting it in MIPs or systematic withdrawal plans (SWP). Returns from gilt schemes have fallen to around 3 to 4 per cent in the last two months. The restrictions on investments in RBI Relief Bonds and the benefits accruing thereto has also resulted in investors' preference shiftingto MIPs.