MUTUAL funds are lining up new products, which temper volatility in returns by investing in a mix of equity and debt or pure debt products even as the equity markets continue to fluctuate.
Pramerica Asset Managers, Principal PNB, Fidelity Fund Management and JP Morgan Asset Management have lined up new fund offers that aim to deploy money in such funds to lure investors, who are wary of entering equity markets when the benchmark indices are trading at their all time highs and there is an interest rate risk as well.
US-based Prudential Financial-promoted Pramerica recently launched two funds, one of them will track the relative attractiveness of different asset class (equity and debt) powered by its in house software called Dynamic Asset Rebalancing Tool while allocating funds.
"Pramerica Dynamic Fund will aim to buy equities when prices are down and sell when they are up following the principle of optimum asset allocation between debt and equity," said Vijay Mantri, MD and CEO of Pramerica Asset Managers.
Principal PNB, too, has lined up a similar product called Smart Equity Fund that will track the price to earning ratio (P/E Ratio) of Nifty index. When the markets become expensive in terms of a set P/E ratio, the scheme will reduce its allocation to equities and move assets into debt or money market instruments and vice-versa. The fund will deploy up to 100 per cent of assets in equity and equity related instruments of largecap companies at 'attractive P/E levels'. "Such deliberated asset moves help the fund contain downsides better than pure-play equity funds and provide an opportunity to deliver better returns than debt funds," a Principal PNB official said.
Fidelity Fund Management also launched a shortterm income fund on Thursday that will track prevailing interest rate scenario supported by quantitative research. Shriram Ramanathan, portfolio managerfixed income, Fidelity Fund Management, said, "In the current environment where short-term yields have moved up significantly, on a risk-adjusted basis, shortterm income funds provide a good opportunity for investors to benefit from the higher yields, yet keeping interest rate risk at an acceptably low level."
The Fidelity Short Term Income Fund will invest largely into debt and money market instruments with maturity up to two years and up to 35 per cent in to debt and money market instruments with more than two years maturity.
JP Morgan Asset Management India has launched a Capital Protection Oriented Fund, a 39 month close ended income scheme. The primary investment objective of the plan is to generate returns and reduce interest rate volatility, through a portfolio of fixed income securities that are maturing on or before the maturity of the scheme along with capital appreciation through equity exposure, said a statement.
The asset allocation of the scheme will be 80-100 per cent in debt and money market instruments and 020 per cent in equity and equity linked instruments.
"The plan follows a passive investment strategy for the fixed income component of the scheme. The equity component of the scheme will be primarily invested in diversified equity and equity related securities of the companies that have a potential to appreciate in the long run," a statement issued by JP Morgan said.
Nandkumar Surti, chief investment officer, JP Morgan Asset Management India, said, "The fund provides an attractive investment opportunity for riskaverse investors looking at a marginal equity exposure. It will try to capture the current rates of interest in the debt portion of the portfolio, while the equity portion is expected to deliver superior returns."
