So far, LIC MF has only launched assured return schemes under the Dhanvarsha series. The asset management company has now made a conscious decision to move away from assured returns in an era of volatile interest rates.

Besides, LIC Mutual Fund, SBI MF and Unit Trust of India launched their open-end debt funds last year and have garnered substantial corpus under these schemes in less than one year. While SBI MF has already jettisoned its assured return series, UTI is still continuing with assured-return monthlyincome plans.

``The corpus of UTI Bond Fund has already crossed Rs 500 crore while SBI MF's open-end debt fund, which was mobilised Rs 35 crore initially, has already gone past Rs 100 crore. This reflects that there is a sizeable section of investors who want market-related returns from their debt plans with the added advantage of liquidity,'' said an analyst.

Since the initial issue expenses will be borne by the asset management company, the units of LIC Bond Fund are available on a no-load basis. However, the fund will charge an exit load of 2 per cent if units are redeemed within one year of allotment. The fund will open for fresh sale of units June 23 while investors can redeem units from August 7. The minimum subscription in the bond fund has been pegged at Rs 5000. The fund offers regular income and capital appreciation options with tax breaks under section 54EA and EB.

With the budget imposing a 11 per cent dividend tax (including surcharge) on sschemes with less than 50 per cent dividendexposure, it is advisable that investors opt for the growth option in debt funds. ``In case of the income option, there will be an extra outflow of 11 per cent from the NAV which will pull down the returns for investors,'' said a fund manager.