MF Corner | Understanding features and benefits of target maturity funds

Target maturity fund, a kind of passively managed debt mutual fund scheme, comes with a specified maturity date replicating an underlying index. These schemes buy and hold similar maturity bonds in the index they track. Speaking to CNBC-TV18, Gautam Kaul, Senior Fund Manager-Fixed Income at Bandhan AMC, said that the underlying of these products are typically in three categories, which are government-securities (G-Secs), state development loans (SDLs), AAA corporate bonds, or a mix of the three.

"The maturity is range from as low as one to two years to as high as 10 to 15 years as well," Kaul said.

Unlike recurring and fixed deposits, target maturity funds are open-ended. This means that investors can liquidate their holdings at the prevailing market valuation.