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An interval fund is a type of mutual fund, the units of which can be purchased and sold/redeemed only during time intervals specified by the fund house. The time intervals could be monthly, quarterly, semi-annual or annual. Thus, you can say an interval fund represents a mix of open-ended and close-ended funds in terms of subscription and redemption features. Very few mutual fund schemes are launched as interval funds.
Interval Fund vs Close-ended Fund
Unlike, a close-ended fund, an interval fund is generally not listed on stock exchanges or other secondary markets and thus its investors can redeem their units by selling them to the fund house during the specified redemption periods.
Interval Fund vs Fixed Maturity Plan (FMP)
An Interval fund is similar to a Fixed Maturity Plan (FMP) because your money remains invested in the fund for a fixed tenure and you cannot redeem the investment before maturity. However, in an interval fund, the redemption periods occur at intervals during the tenure of the fund while in an FMP, you have to wait until maturity.
Features of Interval Funds
- Asset Allocation: An interval fund can invest in both equity and debt. However, it mostly invests in debt instruments.
- Illiquidity: Since the units of an interval fund can be bought and sold only during specific intervals, it does not provide much liquidity to investors. Thus, an interval fund cannot act as an emergency fund. However, due to this illiquidity, the fund manager of an interval fund is better positioned to invest in securities which have tenures matching the fund’s maturity period and provide better returns to investors.
- Cost: The expense ratio of an interval fund is generally higher than other mutual funds.
- Risk: Since an interval fund predominantly invests in debt securities, it is a low-risk investment instrument.
Who Should Invest in Interval Funds?
An interval fund is ideal for investors who have short-time financial goals and who are willing to take low to moderate level of risk. Since Interval funds are not listed on stock exchange, their assets are in the form of forestry tracts, commerical property, business loans, and private assets. Investors who are willing to get exposure to such unconventional assets may invest in these funds.
While investing in Interval funds, it is important that you keep a thorough check on the risks involved, the returns to be expected, financial goals, tax implications and the investment horizon.
Taxation of Interval Funds
The taxation of an interval fund depends on how much of its assets are invested in equity and debt. If at least 65% of its assets are invested in equity and equity-related instruments, it is taxed like an equity fund and otherwise like a debt fund.
You can read about the taxation of mutual funds in detail here.
Here is a List of Top Performing Mutual Funds One Can Consider Investing in:
| Fund Name | 1 Year Return | 3 Year Return | 5 Year Return |
| Axis Bluechip Fund – Direct Plan | 22% | 21% | 11% |
| Mirae Asset Tax Saver Fund – Direct Plan | 18% | 20% | – |
| Axis Midcap Fund – Direct Plan | 18% | 19% | 12% |
| Axis Bluechip Fund – Growth | 21% | 19% | 10% |
| Axis Long Term Equity Fund – Direct Plan | 18% | 18% | 12% |
| Invesco India Growth Opportunities Fund – Direct Plan | 14% | 18% | 12% |
| Axis Midcap Fund – Growth | 16% | 18% | 10% |
| Mirae Asset Tax Saver Fund – Regular Plan | 16% | 18% | – |
| Mirae Asset Emerging Bluechip Fund – Growth | 16% | 17% | 16% |
| Kotak India EQ Contra Fund – Direct Plan | 14% | 17% | 11% |
| Canara Robeco Bluechip Equity Fund – Direct Plan | 18% | 17% | 10% |
| HDFC Index Sensex – Direct Plan Growth | 18% | 17% | 9% |
| Nippon India Index Fund Sensex Plan – Direct Growth | 18% | 17% | 8% |
| Mirae Asset Large Cap Fund – Direct Growth | 16% | 17% | 13% |
| Tata Index Sensex Direct Plan | 18% | 17% | 9% |
| Axis Small Cap Fund – Direct Plan | 23% | 16% | 13% |
| IIFL Focused Equity Fund – Direct Plan | 29% | 16% | 12% |
| JM Multicap Fund – Direct Plan | 19% | 16% | 11% |
| Axis Long Term Equity Fund – Growth | 17% | 16% | 11% |
| JM Tax Gain Fund – Direct Plan | 16% | 16% | 11% |
| Invesco India Growth Opportunities Fund – Growth | 13% | 16% | 10% |
| Canara Robeco Bluechip Equity Fund – Regular Plan | 16% | 16% | 9% |
| Canara Robeco Equity Diversified – Direct Plan | 14% | 16% | 9% |
| Canara Robeco Equity Diversified – Regular Plan | 13% | 16% | 8% |
| DSP Equity Fund – Direct Plan | 20% | 15% | 10% |
| JM Tax Gain Fund – Growth | 16% | 15% | 10% |
| Kotak India EQ Contra Fund – Growth | 12% | 15% | 9% |
| Mirae Asset Hybrid Equity Fund – Direct Growth | 15% | 15% | NA |
| Tata Retirement Savings Fund Moderate Plan – Direct Growth | 13% | 15% | 13% |
| Mirae Asset Emerging Bluechip Fund | 18.27% | 14.40% | 17.53% |
| Axis Small Cap Fund – Growth | 21% | 14% | 12% |
| IIFL Focused Equity Fund – Growth | 27% | 14% | 11% |
| DSP Equity Fund – Regular Plan | 19% | 14% | 9% |
| Aditya Birla Sun Life Tax Relief 96 – Direct Growth | 9% | 14% | 12% |
| Invesco India Mid Cap Fund – Direct Plan | 6% | 13% | 11% |
| Invesco India Infrastructure Fund – Direct Plan | 12% | 13% | 7% |
| L&T India Large Cap Fund – Direct Growth | 16% | 13% | 8% |
| DSP Equity & Bond Fund – Direct Growth | 17% | 12% | 11% |
| SBI Small Cap Fund | 8.33% | 11.28% | 17.04% |
| Canara Robeco Emerging Equities Fund | 10.38% | 11.25% | 13.89% |
| Tata Mid Cap Growth Fund – Regular Plan | 10% | 11% | 9% |
| Invesco India Infrastructure Fund – Growth | 10% | 11% | 6% |
| LIC MF Infrastructure Fund – Direct Plan | 15% | 11% | 5% |
| HDFC Index Sensex Fund – Growth | -2% | 11% | 8% |
| ICICI Prudential Equity & Debt Fund | 8.11% | 10.41% | 10.65% |
| ICICI Prudential Balanced Advantage Fund | 12.79% | 10.40% | 10.37% |
| LIC MF Infrastructure Fund – Growth | 13% | 10% | 4% |
| HDFC Hybrid Equity Fund | 9.44% | 9.50% | 10.22% |
| PGIM India Dynamic Bond Fund | 13.69% | 9.32% | 10.08% |
| SBI Magnum Medium Duration Fund | 11.77% | 9.31% | 9.80% |
| Kotak Asset Allocator Fund | 11.09% | 9.29% | 9.12% |
| Franklin India Dynamic Accrual Fund | 9.51% | 9% | 9.98% |
| DSP Natural Resources and New Energy Fund – Direct Plan | 0% | 9% | 11% |
| Kotak Emerging Equity Scheme | 11.35% | 8.38% | 12.89% |
| ICICI Prudential All Seasons Bond Fund | 11.28% | 8.24% | 9.91% |
| Aditya Birla Sun Life Balanced Advantage Fund | 9.99% | 8.20% | 9.46% |
| Nippon India Small Cap Fund (earlier Reliance Small Cap Fund) | -2.60% | 8.14% | 11.82% |
| DSP Natural Resources and New Energy Fund – Regular Plan | -1% | 8% | 11% |
| Motilal Oswal Multicap 35 Fund – Regular Growth | -10% | 8% | 15% |
| ICICI Prudential Bluechip Fund – Growth | -6% | 8% | 9% |
| Tata Retirement Savings Fund Moderate Plan – Regular Growth | -8% | 8% | 12% |
| Axis Strategic Bond Fund | 8.32% | 7.68% | 9.11% |
| SBI Magnum MultiCap Fund – Growth | -5% | 7% | 12% |
| L&T Tax Advantage Fund – Growth | -13% | 7% | 9% |
| Aditya Birla Sun Life Tax Relief 96 – Growth | -13% | 7% | 11% |
| L&T India Value Fund – Growth | -13% | 6% | 11% |
| DSP Equity Opportunities Fund – Growth | -8% | 6% | 10% |
| SBI Bluechip Fund – Growth | -6% | 5% | 10% |