18 Aug 2026
Fixed Maturity Plans (FMPs) are close-ended debt mutual fund schemes with a predefined investment tenure. These schemes primarily invest in debt and money market instruments that generally mature on or before the scheme's maturity date, in line with the investment objective of the scheme. FMPs are available for subscription only during the New Fund Offer (NFO) period. After the NFO closes, fresh investments are generally not permitted and investors typically remain invested until the scheme matures.
Key Takeaways
- Fixed Maturity Plans (FMPs) are closed-ended debt mutual funds with a predefined investment tenure.
- Investments can generally be made only during the New Fund Offer (NFO) period.
- FMPs primarily invest in debt and money market instruments that are generally selected to mature on or before the scheme's maturity date.
- Returns are market linked and depend on the performance of the underlying portfolio. They are not fixed or guaranteed.
- Units are ordinarily redeemed on the maturity date, while an early exit is generally possible only through stock exchange transactions, subject to market liquidity.
- FMPs are exposed to risks such as market risk, interest rate risk, credit risk and liquidity risk.
- Investors should consider their financial goals, investment horizon and risk appetite before investing and refer to the Scheme Information Document (SID) for complete scheme details.
What is a Fixed Maturity Plan (FMP)?
Fixed Maturity Plan (FMP) is a closed-ended debt mutual fund launched with a predefined investment tenure. Subscription to the scheme is available only during the New Fund Offer (NFO) period. After closure of the NFO, fresh subscriptions are not accepted and the scheme continues until its scheduled maturity date. Investments under FMP are made primarily in debt and money market instruments, including Government Securities (G-secs), Treasury Bills, Corporate Bonds, Certificates of Deposit (CDs), Commercial Papers (CPs) and other eligible debt securities. Portfolio construction is carried out in accordance with the investment objective and asset allocation specified in the Scheme Information Document (SID), with investments generally made in securities expected to mature on or before the maturity date of the scheme.
How Do Fixed Maturity Plans Work?
A Fixed Maturity Plan (FMP) follows a predefined investment lifecycle, beginning with the New Fund Offer (NFO) and ending on the scheme's maturity date.
1) Launch through a New Fund Offer (NFO)
An FMP is launched through a New Fund Offer (NFO), during which investors can subscribe to the scheme. Once the NFO closes, fresh subscriptions are not accepted, as the scheme follows a closed-ended structure.
2) Portfolio Construction
After the NFO, the fund manager invests the corpus in accordance with the investment objective and asset allocation specified in the Scheme Information Document (SID). The portfolio primarily comprises debt and money market instruments, such as:
- Government Securities (G-secs)
- Treasury Bills
- State Development Loans (SDLs)
- Corporate Bonds
- Certificates of Deposit (CDs)
- Commercial Papers (CPs)
- Other eligible money market and debt instruments
The portfolio is generally constructed by investing in securities that are expected to mature on or before the maturity date of the scheme.
3) Portfolio Management During the Scheme Tenure
During the tenure of the scheme, the portfolio is managed in line with the investment objective and applicable regulatory requirements. The value of the scheme may change over time due to factors such as movements in interest rates, changes in the credit quality of the underlying securities and prevailing market conditions. As a result, the Net Asset Value (NAV) of the scheme may fluctuate until maturity.
4) Maturity of the Scheme
On the maturity date, the underlying investments mature or are realised in accordance with their respective terms. After meeting applicable expenses and other obligations of the scheme, the maturity proceeds are distributed to unitholders in accordance with the provisions of the Scheme Information Document (SID) and applicable regulatory requirements.
Features of Fixed Maturity Plans
Fixed Maturity Plans (FMPs) have a distinct investment structure that sets them apart from other categories of debt mutual funds. Understanding these features can help investors know how the scheme operates and what to expect during its tenure.
1) Fixed Investment Horizon
Every FMP is launched with a predefined maturity date. The investment tenure is announced at the time of the New Fund Offer (NFO), allowing investors to know the duration of the scheme before investing.
2) Closed-ended Scheme
An FMP follows a closed-ended structure. Subscriptions are accepted only during the NFO period and the scheme is not open for fresh investments once the offer closes. It remains operational until the specified maturity date.
3) Investment in Fixed Income Securities
The scheme primarily invests in debt and money market instruments, such as Government Securities (G-secs), Treasury Bills, State Development Loans (SDLs), Corporate Bonds, Certificates of Deposit (CDs), Commercial Papers (CPs) and other eligible fixed income securities. The investment universe is determined by the scheme's investment objective and asset allocation.
4) Portfolio with Matching Maturity Profile
The fund manager generally selects securities that are expected to mature on or before the maturity date of the scheme. This approach aligns the maturity profile of the underlying investments with the tenure of the FMP and forms an important part of its investment strategy.
5) Market-linked Returns
Although an FMP invests in fixed income instruments, it is a mutual fund scheme. Its performance depends on the value of the underlying portfolio and prevailing market conditions. As a result, returns are market-linked and are neither fixed nor guaranteed.
6) Limited Redemption During the Tenure
Unlike open-ended mutual funds, investors cannot redeem units directly with the mutual fund during the tenure of the scheme. Closed-ended schemes are generally listed on a recognised stock exchange, where units may be bought or sold, subject to market liquidity.
7) Managed by Professional Fund Managers
Investment decisions are taken by professional fund managers in accordance with the Scheme Information Document (SID), investment objective and applicable regulatory requirements. The portfolio is monitored throughout the tenure of the scheme to ensure compliance with the stated investment mandate.
What Do FMPs Invest In?
A Fixed Maturity Plan (FMP) primarily invests in debt and money market instruments with maturities that broadly align with the tenure of the scheme. The investment objective is to build a portfolio of fixed income securities that can generally be held until maturity, subject to the investment strategy disclosed in the Scheme Information Document (SID).
Depending on the scheme mandate, an FMP may invest in:
- Government Securities (G-secs)
- Treasury Bills (T-Bills)
- State Development Loans (SDLs)
- Corporate Bonds
- Non-Convertible Debentures (NCDs)
- Certificates of Deposit (CDs)
- Commercial Papers (CPs)
- Money Market Instruments
- Cash and cash equivalents, where permitted
The exact portfolio composition varies from one scheme to another and depends on factors such as the scheme's tenure, investment objective, credit quality requirements and prevailing market conditions.
Lock-in, NFO & Listing
A Fixed Maturity Plan follows a closed-ended structure, which differs from most mutual fund schemes.
1) New Fund Offer (NFO)
Investors can subscribe to an FMP only during its New Fund Offer (NFO) period. Once the subscription window closes, fresh investments are generally not permitted. Unlike open-ended mutual funds, investors cannot purchase additional units after the NFO has ended.
2) Is There a Lock-in Period?
An FMP does not have a statutory lock-in period similar to tax saving mutual funds. However, because it is a closed-ended scheme, investors generally remain invested until the maturity of the scheme. Therefore, although it is not technically a lock-in, the investment is intended to remain invested for the entire tenure of the scheme.
3) Stock Exchange Listing
As per regulatory requirements, closed-ended mutual fund schemes are generally listed on a recognised stock exchange. Investors wishing to exit before maturity may sell their units through the stock exchange, subject to the availability of buyers and market liquidity. The trading price may differ from the Net Asset Value (NAV) and there is no assurance that investors will be able to exit at their desired price.
FMP vs Open-Ended Debt Funds
Both Fixed Maturity Plans (FMPs) and open-ended debt funds invest in debt and money market instruments. However, they differ in terms of their investment structure, subscription and redemption process, portfolio management and investment tenure.
| Basis of Comparison | Fixed Maturity Plan (FMP) | Open-Ended Debt Fund |
|---|---|---|
| Scheme Structure | Closed-ended mutual fund | Open-ended mutual fund |
| Subscription | Available only during the New Fund Offer (NFO) | Available for purchase on an ongoing basis |
| Redemption | Units are redeemed on the scheme's maturity. Exit before maturity is generally through the stock exchange, subject to market liquidity. | Units can generally be redeemed with the mutual fund on any business day, subject to the terms of the scheme. |
| Investment Tenure | Predetermined at the time of launch | No fixed maturity period for the scheme |
| Portfolio Construction | Portfolio is generally invested in securities expected to mature on or before the scheme's maturity date | Portfolio composition and duration may change in line with the investment objective and market conditions |
| Liquidity | Limited before maturity | Generally offers greater liquidity due to continuous purchase and redemption |
| NAV Movement | NAV changes based on the valuation of the underlying portfolio | NAV also changes based on the valuation of the underlying portfolio |
Taxation of Fixed Maturity Plans
The tax treatment of a Fixed Maturity Plan (FMP) depends on when you invested in the scheme and the applicable provisions of the Income Tax Act.
- For investments made on or after 1 April 2023, capital gains are generally taxed at your applicable income tax slab rate, irrespective of the holding period, subject to the prevailing tax laws.
- For investments made before 1 April 2023, the tax treatment may differ based on the holding period and the applicable tax provisions at the time of redemption.
As tax laws may change from time to time, it is recommended to refer to the latest Kotak Mutual Fund Tax Reckoner to understand the tax implications applicable to your investment.
Risks in Fixed Maturity Plans
Fixed Maturity Plans (FMPs) invest primarily in debt and money market instruments and are subject to investment risks. Although the portfolio is generally structured so that the underlying securities mature on or before the scheme's maturity date, changes in market conditions may affect the value of these securities during the investment period. As a result, the scheme's Net Asset Value (NAV) may fluctuate.
1) Market Risk
The value of the securities held by an FMP can change due to movements in interest rates, inflation, credit spreads, liquidity conditions and broader economic or market developments. These factors may influence the NAV of the scheme during its tenure.
2) Interest Rate Risk
Debt securities generally have an inverse relationship with interest rates. When interest rates rise, the market value of existing debt securities typically declines and vice versa. While FMPs generally follow a buy and hold investment strategy, interest rate movements may still affect the valuation of the portfolio before maturity.
3) Credit Risk
FMPs are exposed to the risk that an issuer of a debt security may experience a deterioration in credit quality or fail to meet its payment obligations. Any adverse change in an issuer's credit profile may affect the market value of the security and, consequently, the scheme's NAV.
4) Liquidity Risk
Fixed Maturity Plans are closed-ended mutual fund schemes. Units can generally be purchased only during the New Fund Offer (NFO) period and are ordinarily redeemed on the scheme's maturity date. Although the units are listed on a recognised stock exchange, trading volumes may be limited. Investors seeking to exit before maturity may not be able to sell their units readily or at a price equal to the prevailing NAV.
Advantages of Fixed Maturity Plans
A Fixed Maturity Plan offers certain structural features that distinguish it from other debt mutual funds.
1) Defined Investment Horizon
Every FMP has a predetermined maturity date, allowing investors to align their investment tenure with specific financial goals or future cash flow requirements.
2) Portfolio Aligned with Scheme Maturity
The scheme generally invests in debt instruments that mature on or before the maturity date of the fund. This held to maturity approach may help reduce the impact of interest rate movements over the investment period.
3) Professional Portfolio Management
The portfolio is managed by experienced fund managers who select and monitor debt securities in accordance with the scheme's investment objective and regulatory requirements.
4) Diversification Across Debt Instruments
An FMP may invest across multiple issuers and different categories of debt and money market instruments, depending on the scheme mandate. Diversification may help reduce concentration risk, although it cannot eliminate investment risk.
5) Transparent Investment Tenure
The maturity period of the scheme is known at the time of launch, enabling investors to understand the investment horizon before subscribing during the New Fund Offer.
Limitations of Fixed Maturity Plans
While FMPs offer certain advantages, investors should also consider their limitations.
1) Limited Investment Window
Investments can generally be made only during the New Fund Offer (NFO). Once the subscription period closes, fresh investments are not accepted.
2) Limited Liquidity Before Maturity
Unlike open-ended mutual funds, investors cannot redeem units directly with the mutual fund before maturity. Exit before maturity depends on the availability of buyers on the stock exchange.
3) Market Linked Returns
FMPs do not offer fixed or guaranteed returns. The performance of the scheme depends on the underlying portfolio, market conditions, credit quality of issuers and other factors.
4) Credit Risk Remains
Even if the portfolio is held until maturity, changes in the credit quality of issuers may affect the valuation of securities and the overall performance of the scheme.
Who Can Consider Investing in FMPs?
A Fixed Maturity Plan (FMP) may be suitable for investors who:
- Have an investment horizon that broadly aligns with the maturity of the scheme.
- Understand the features of closed-ended debt mutual funds and are comfortable remaining invested until maturity.
- Wish to invest in a professionally managed portfolio of debt and money market instruments.
- Understand that the value of investments may fluctuate and are aware of risks such as interest rate risk, credit risk and liquidity risk.
- Are looking to diversify their investment portfolio through debt-oriented mutual fund investments.
Whether an FMP is appropriate depends on an investor's financial goals, investment horizon, risk tolerance and overall asset allocation. Investors should carefully read the Scheme Information Document (SID) and other scheme-related documents before making an investment decision.
How to Invest in an FMP?
Since an FMP is a closed-ended mutual fund, investments can generally be made only during the scheme's New Fund Offer.
The investment process typically involves the following steps:
- Review the Scheme Information Document (SID), Key Information Memorandum (KIM) and other offer documents.
- Evaluate the scheme's investment objective, tenure, asset allocation and risk factors.
- Complete the applicable Know Your Customer (KYC) requirements.
- Submit the application during the NFO period through the mutual fund, registrar, distributor or an authorised online investment platform.
- Hold the investment until the scheme matures or, if required, explore an exit through the stock exchange, subject to market liquidity.
Investors should ensure that the tenure of the scheme aligns with their investment horizon before investing.
Conclusion
A Fixed Maturity Plan (FMP) is a closed-ended debt mutual fund that invests primarily in debt and money market instruments with maturities generally aligned to the tenure of the scheme. Its predefined investment horizon, professionally managed portfolio and structured investment approach distinguish it from open-ended debt funds. However, like all mutual fund investments, FMPs are subject to market, interest rate, credit and liquidity risks and returns are market-linked rather than guaranteed. Before investing, investors should assess whether the scheme's tenure, investment objective and risk profile align with their financial goals and investment horizon. Reading the Scheme Information Document (SID) and other scheme-related documents can help investors make an informed investment decision.
Frequently Asked Questions
1) What is a Fixed Maturity Plan (FMP)?
A Fixed Maturity Plan (FMP) is a closed-ended debt mutual fund with a predetermined tenure that primarily invests in debt and money market instruments maturing on or before the scheme's maturity date.
2) What is the full form of FMP?
FMP stands for Fixed Maturity Plan.
3) How do Fixed Maturity Plans work?
An FMP accepts investments during its New Fund Offer (NFO), invests in debt securities aligned with the scheme's tenure and generally holds these investments until maturity.
4) Do FMPs offer guaranteed returns?
Fixed Maturity Plans are market-linked mutual fund schemes. Their returns depend on the performance of the underlying debt securities and are not guaranteed or assured.
5) How are Fixed Maturity Plans taxed?
The taxation of FMPs depends on the applicable provisions of the Income Tax Act, the date of investment and the nature of the scheme. Investors should refer to the latest tax regulations.
6) Can I exit an FMP before maturity?
Since an FMP is a closed-ended mutual fund, units are generally redeemed on maturity. Investors seeking an early exit may sell units through the stock exchange, subject to market liquidity.
7) What is the typical tenure of an FMP?
The tenure of an FMP varies from one scheme to another and may range from a few months to several years, depending on the investment objective.
8) What do Fixed Maturity Plans invest in?
FMPs primarily invest in debt and money market instruments such as Government Securities, Treasury Bills, Corporate Bonds, Certificates of Deposit, Commercial Papers and other fixed income securities.
9) What are the risks of investing in an FMP?
Some of the key risks include credit risk, interest rate risk, liquidity risk and market risk associated with debt securities.
10) How is an FMP different from an open-ended debt fund?
An FMP has a fixed tenure and accepts investments only during its NFO, whereas an open-ended debt fund allows investors to purchase and redeem units throughout the year, subject to applicable terms and conditions.
Disclaimers
Investors may consult their Financial Advisors and/or Tax advisors before making any investment decision.
These materials are not intended for distribution to or use by any person in any jurisdiction where such distribution would be contrary to local law or regulation. The distribution of this document in certain jurisdictions may be restricted or totally prohibited and accordingly, persons who come into possession of this document are required to inform themselves about, and to observe, any such restrictions.
MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.
