If you are planning to invest in a close-ended debt fund and want to have a 'feel' of the return you can expect, you can now do that easily, thanks to a new directive from the Securities and Exchange Board of India (Sebi).
Sebi has asked fund houses for more disclosures in scheme information documents of close-ended debt funds on securities in which they will invest, a tentative range of allocation to different securities, the sectors they will be allocating to and the credit quality of these securities.
The disclosures will help investors approximate the yield or interest income they can expect from a close-ended debt fund.
If a debt fund scheme discloses that it intends to invest 10-15% in commercial papers, 20-25% in certificates of deposits and 60-70% in treasury bills, an investor, with the help of his financial planner, can calculate the approximate returns from the scheme based on the current yield on the above mentioned securities.
Earlier, fund houses used to indicate the yield on close-ended debt funds. However, Sebi in January 2009 put an end to the practice, saying that such an information could mislead investors.