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What are Interval Funds?
Interval funds are a type of mutual fund, where the units can be purchased or sold during a particular predetermined time period only. They may invest in both debt and equity securities, but they are mostly observed to park money in debt instruments. Interval schemes combine the features of closed-end funds and open-ended funds. The units may be traded on the stock exchange or may be open for sale or redemption during pre-decided periods at NAV-related prices.
The features of interval funds are as under:
The benefits associated with interval funds are as follows:
Interval schemes are quite similar to fixed maturity plans. The investor’s money remains invested for a fixed period of time, and the investment cannot be redeemed prior to the maturity date. The fund manager thus gets the opportunity to set a robust investment strategy in place, without having to worry about redemption requests and liquidity. He or she will allocate the investor’s money in securities for a term that suits the fund’s maturity.
Interval schemes typically invest in illiquid assets, and are best-suited for entities looking for unconventional assets. Investments are generally made in assets like forestry tracts, commercial property and business loans, among others. Investors with short-term financial goals and low-to-moderate risk tolerance are often advised this route for wealth creation.
Some of the interval schemes available in the market include: