Definition
Target Maturity Fund
A target maturity fund is a passive debt fund or ETF that holds bonds maturing around a fixed future date and tracks a bond index, offering predictable yield-to-maturity if held to the target.
Popular in India for government and PSU bond exposure (including some Bharat Bond ETF tranches), target maturity funds hold a defined-maturity basket and let bonds roll down toward the target date. An investor holding to maturity gets a return close to the entry yield-to-maturity, with interest-rate risk falling as the date nears.
These funds combine the diversification and low cost of indexing with the visibility of a maturity date, making them an alternative to holding individual bonds or FMPs. As a bond ETF or index fund, the structure offers transparency and, for the ETF version, intraday tradability subject to liquidity.
Related terms
- iNAV (Indicative Net Asset Value)iNAV is a near-real-time estimate of an ETF's per-unit net asset value, recalculated frequently through the trading day from the live prices of the underlying holdings.
- Tracking ErrorTracking error is the standard deviation of the difference between an index fund or ETF's returns and its benchmark index's returns, measuring how consistently the fund follows the index.
- Bond ETFA bond ETF is an exchange-traded fund that holds a portfolio of fixed-income securities, such as government or corporate bonds, tracking a bond index and trading on the exchange like a stock.
- Index FundAn index fund is a passively managed mutual fund that aims to replicate the performance of a market index by holding the same securities in the same proportions, at low cost.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.