Assured returns scheme
A mutual fund scheme that promises a specific return, permitted only where a guarantor named in the Scheme Information Document undertakes to pay the shortfall if the scheme itself cannot.
In plain language
Mutual funds are ordinarily not permitted to promise any returns. Every scheme carries market risk, and telling an investor what they will earn before the year has even started is exactly the kind of claim SEBI's advertisement code exists to prevent.
The one exception is the assured returns scheme. It may promise a return, but only because there is a named party standing behind that promise — the promise is not the AMC's alone to make.
How it works
An assured returns scheme calls for a guarantor, who must be named in the Scheme Information Document (SID). If the scheme's own portfolio is not able to generate the promised return, the guarantor is the one who makes up the difference — the workbook's own phrase is that the guarantor "will need to write out a cheque" if the scheme is otherwise unable to pay the assured return.
Every other mutual fund scheme return claim is instead governed by SEBI's advertisement code and guidelines for disclosing performance-related information, which the same chapter covers separately.
A worked example
Suppose Himalaya Assured Income Fund promises unit holders a return of 7% per annum, with Himalaya Financial Services Ltd named as guarantor in the SID.
In a year when the scheme's underlying debt portfolio yields only 5.2%, the shortfall of 1.8 percentage points is not absorbed by the unit holder. Himalaya Financial Services Ltd, as the named guarantor, is contractually on the hook to make up the difference — on a scheme with Rs 200 crore of AUM, that is roughly Rs 3.6 crore the guarantor must fund so investors still receive their promised 7%.
Contrast this with an ordinary equity or debt scheme that merely states an indicative return range in its marketing: if that scheme underperforms, no guarantor exists and unit holders simply earn the lower, actual return.
Why NISM asks about it
Chapter 7, under "SEBI Norms regarding Representation of Returns by Mutual Funds in India". Expect a question testing whether mutual funds may promise returns (no, unless it is an assured returns scheme), and what stands behind the promise (a guarantor named in the SID, not the AMC or SEBI).
Common exam traps
- The guarantor is a named third party, not SEBI and not automatically the sponsor — the SID must name who it is.
- This is the sole exception to the rule that mutual funds cannot promise returns; do not read any other scheme type as implicitly assured.
- A close-ended FMP giving investors clarity on likely returns is not the same as an assured returns scheme — the workbook is explicit that even an FMP carries no guarantee or assurance of returns.
Where this is taught
- Series V-A · Chapter 10: Risk, Return and Performance of Fundsintroduced here
- Series V-B · Chapter 7: Performance of Mutual Fundsintroduced here
Related terms
- Net Asset ValueThe net assets of a mutual fund scheme divided by the number of units outstanding — what one unit of the scheme is worth on a given day, after every liability except the unitholders' own.
- SponsorThe person or firm that sets up the mutual fund — applies to SEBI for registration, executes the trust deed in favour of the trustees, and puts up the capital of the AMC.
- Fixed Maturity PlanA close-ended debt scheme whose portfolio maturity is aligned to the scheme's own maturity date, so the investor who stays to the end has a reasonably visible outcome — though never a guaranteed one.
- Simple returnThe plain percentage change in the value of an investment over a period — (ending value minus beginning value) divided by beginning value — with no adjustment for time or compounding.