SBI Mutual floats capital protection fund

As investors turn risk averse due to volatile markets, SBI Mutual Fund is attempting to attract them with a capital protection fund, even though the category has historically yielded poor returns.


SBI Capital Protection Oriented Fund Series II is a five-year close-ended scheme, aimed at protecting capital on maturity through investments in equity, debt and money market instruments. The fund will be open for subscription between February 18 and March 11.


To reduce interest rate risk, the fund will invest in central government schemes or debt issued by AAA-rated companies, Navneet Munot, chief investment officer, SBI Mutual Fund, said.


Capital protection funds invest in the safest securities, and, hence, give poor returns. Most funds in this category have returned 4-5% return over three years. SBI Capital Protection Oriented Fund Series I returned just about 3.5% over three years, when the five-year government bond yields were around 7.5%.


“Investors can easily protect capital by investing a part of their income (75-80%) in FDs or MIPs and the rest in the equity market,” says Gaurav Mashruwala, a Mumbai-based independent financial advisor. “This will provide them similar payoffs at lower fund management charge.”


Source: EconomicTimes