DWS Hybrid Fixed Term Fund-Series

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Past performance of Deutsche MF's fund managers have not been encouraging

WHAT IS IT: DWS Hybrid Fixed Term Fund-Series 11 (DHFTF-11) is the 11th and latest in a series of close ended hybrid fixed maturity plans (FMPs) launched by Deutsche Mutual Fund since August 2011. It has a 39 month tenure.

NFO PERIOD & THEREAFTER: The NFO is open from January 22 to February 4, with minimum subscription amount of Rs 5,000. Being a close-ended scheme, you can not buy it from the mutual fund directly after the NFO closes. Afterward, you can buy or sell its demat units on NSE, but liquidity is almost zero in all the listed close-ended MF schemes.

SCHEME OBJECTIVE: Being a close-ended scheme, it seeks to generate returns from debt securities (having tenures of close to 39 month) without being affected, negatively or positively, by future interest rate fluctuations. The equity portion is aimed at giving a boost to returns, although, in theory and reality, it can also eat away into the returns from fixed income investments.

ASSET ALLOCATION: The fund's offer docutive ments mentions indica allocations of 75-100 per cent in domestic debt securities including government securities, 0-25 per cent in money market instruments and cash and 5-20 per cent in equities. FC VERDICT: Although DHFTF-11 is a typical FMP , it is among a minority of FMPs that are debt-equity hybrids.

Being a close-ended fund, your investments get locked in for that long and being a hybrid FMP with an equity exposure, there is an added uncertainty on how the fund manager will live up to the challenge of wild fluctuations in equities over a prolonged period.

Taking open-ended tax-saving equity schemes with a three-year lock-in as a proxy for equity performance, FC Research Bureau compared Deutsche MF's Tax Saving Fund's three-year performance with 35 other tax-saver schemes based on their January 28 NAV levels.

Deutsche MF's tax fund ranked a poor 31st. On the debt side, where DHFTF-11 will have dominant exposure, from Deutsche MF's past, unexpired debt FMPs schemes, FCRB analysed comparative performance of DWS FTF-Series91-3Years, launched in October 2011, with three other three-year debt FMP peers launched during that month, and found it to have given the lowest returns in the 14-month period. Another fund, DWS FTF-Series96-3Years (January 2012 launch), was ranked fifth out of six debt FMPs launched in January February 2012 on their nine-month performance.
Clearly, past performance of Deutsche MF's fund managers have not been encouraging.

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