Saturday, March 31, 2012

IFAs find the new capital protection products innovative

Investors are also keen to invest in such capital protection funds where some portion in invested in the equity market ‘options premium’.

In the current challenging market scenario, AMCs have had to think out of the box to make their schemes popular. DSP Blackrock Mutual Fund and Reliance Mutual Fund have both launched Dual Advantage Fund (FMP) where 80 percent of the investment is locked in debt securities and 20 percent is invested in equity and equity related options premium.

The unique feature of this product is that it gives the investor the potential to profit from the ‘options market’ while keeping the investment stable.  Being a FMP, the product is a close-ended scheme with a lock-in period of 3 years. “The important thing about such NFOs is the time of launch. I feel it is a good time when such capital protection products have been launched and there is a rising demand among the investors to buy such product,” said Mukesh Dedhia, Mumbai based IFA.

Amar Pandit, CEO, My Financial Advisor strikes a word of caution.“In such products, the credit quality of the debt investment is important. It is a pretty innovative product where the capital is protected and the investor can also take advantage of the equity market. An investor should only invest in such products when they already have a proper asset allocated portfolio,” said Amar.

Vinod Thakkar, IFA from Kolkata finds many takers for such products. “These capital protection funds provide dual advantage but the only draw-back is that the investment is that it is locked for three years. In the East, most of the investors want to lock their money in debt so such products have a good demand and a number of my clients have invested in these products,” said Vinod.

DSP Blackrock has garnered Rs 168 crore investments through two versions of Dual Advantage Fund launched in February and March this year. “In these funds, investor money is converted from 80 percent debt investment to 100 and the extra returns earned through the equity market is like an icing on the cake. We have got a good response in our earlier products and we are thinking of launching more such products in the next quarter,” said Ajit Menon, Executive Vice President and Head Sales and Marketing, DSP Blackrock.

Himanshu Vyapak, Deputy CEO, Reliance AMC agrees. “This is a new route that the investors are taking without eroding their capital as 80 percent is invested in debt. Even in such a volatile market, we have got positive response from investors as the product does not have too much risk attached to it.We have been able to gather Rs 185 crore from the earlier version of the Dual Advantage Fund where 20 percent of money is invested in equity related options premium and in the current NFO which is closing today, we feel we will be able to raise Rs 300 crore,” said Himanshu.

A few other fund houses are also in the queue for launching such kind of products.


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