In a bid to eventually phase out assured return schemes, the Unit Trust of India (UTI) is planning to launch UTI Bond Fund, an open-ended scheme. According to top UTI officials, the trust will put the first ever 100 per cent debt scheme as a replacement to the existing assured return schemes.
This is the first ever 100 per cent open-ended debt scheme launched by UTI. We will not assure any dividend or income to investors. We are aiming to offer higher returns than those offered by the assured returns schemes through our performance. We have already submitted a proposal to this effect to the Securities and Exchange Board of India (Sebi), A N Palwankar, UTI executive director in-charge of marketing, told Business Standard.
The scheme will have a systematic deposit and withdrawal plan for investors. We will offer returns to investors only through repurchase of units. There will be no income assured. Investors who park their funds for more than one year will get long-term capital gains and indexation benefits, he added. UTI expects the Sebi clearance soon.
The scheme is expected to be launched in May and will be open for initial subscription for 45 days. The trust expects an initial corpus
of Rs 400 crore. At the end of fiscal 1997-98, which ends for UTI in June, the trust will take a view on the future of its various assured return schemes.
It is likely to discontinue the monthly income schemes and concentrate on the new UTI Bond Fund by developing a systematic investment plan for investors. However, it will launch the second monthly income plan scheme for the year before June this year.
UTI chairman G P Gupta had announced earlier that the trust would eventually phase out its assured returns schemes. At present, the Unit Trust of India has Monthly Income Plan (MIP) schemes and Institutional Investors Special Fund Unit Scheme (IISFUS) that offer assured returns to unit holders.
The assured return is supported by the Development Reserve Fund (DRF) set up by Unit Trust of India for carrying out various developmental activities.
The trust plans to reduce dependence on this fund.
Palwankar said Unit Trust of India has not used the DRF for any of its monthly income plan schemes.
All monthly income schemes have been managed well by us and have never taken any support from the DRF for MIPs.
A significant amount of money raised bythe Unit Trust of India has been through these assured return schemes, he said.
In the first MIP for this year, the Unit Trust of India has mopped up Rs 1,000 crore. We have already submitted a proposal to Sebi for the MIP 98 II plan, he added.
The Unit Trust of India is also embarking on a marketing plan to explain the new bond fund to investors.
Sector-specific fund planned
Unit Trust of India is planning to launch the first ever sector-specific domestic fund. The fund will have its entire corpus dedicated to banking and technology stocks.
The domestic fund will be a close-ended scheme.
The trust has already submitted a proposal to Sebi. UTI executive director A N Palwankar said the list of stocks to be invested and the timing of the schemes launch would be decided later.
