What are TMFs ?
Target Maturity Funds are open ended debt funds. These are generally offered as Target Maturity Index Funds or Target Maturity Exchange Traded Funds. As the name suggests, these funds have a fixed maturity date. As these are open ended funds, which means you can anytime invest more or withdraw your investments. Hence, they provide more liquidity.
Why Target Maturity Funds are gaining popularity ?
Following are the key reasons why TMFs are becoming popular and people’s favourite investments these days.
- Due to changes in interest rates on saving schemes, many investors who prefer safe investments, are moving towards debt funds. But debt funds also have risks associated due to fluctuations in prices. So, investors are now looking for consistent returns. And, these funds provide the same.
- According to Experts, “In case of TMFs, the investor knows exactly when the scheme will be completed, what will be the portfolio quality, and what likely return the investor will get,”
- These are passive debt funds that track an underlying bond index. Therefore, these are more transparent and control both interest-rate and credit risk.
- TMFs are currently mandated to invest in government securities, PSU bonds, and SDLs (State Development Loans). Hence, they carry lower default risk compared to other debt funds.
- Since these funds are open-ended, investors can choose to withdraw his/her investment in case of any adverse development around the bond issuers like likelihood of a default or a credit downgrade.
- TMFs should ideally be held up to maturity as this provides some predictability of return
- Few examples are:* Edelweiss NIFTY PSU Bond Plus SDL Index Fund – 2026* IDFC Gilt 2027 Index Fund* Nippon India ETF Nifty SDL 2026 Maturity
* Aditya Birla Sun Life SDL PSU Bond Sep 2026 60:40
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