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Monday, October 6, 2014

Edelweiss Absolute Return Fund - Invest Online

 

Edelweiss Absolute Return Fund - Buy Online

 

Why is it unique? The only equity-oriented fund that is benchmarked against the Crisil MIP Blended Index. Who can benefit? It is useful for those who are ready to sacrifice a small part of their upside for stability.

If you are wondering why an equity-oriented scheme has an MIP as its benchmark, Its overall volatility or possible drawdown when the stock market falls is closer to MIPs, so the nearest benchmark is Crisil MIP Blended Index.

The fund achieves low volatility by adopting three strategies.

First, to reduce risk, the equity component has been fixed at 70%, though it has the mandate to move between 65% and 100%. Second, while it retains 70% of its portfolio in equity, volatility is reduced by dynamic hedging strategies, such as buying out-of-money put options and shorting index futures, whenever needed. Though these derivative strategies reduce the effective equity component, the actual holding in equity shares is above the 65% level and, therefore, it continues to get the tax benefits (short-term capital gains tax of 15% and free long-term capital gains). Third, instead of investing in pure debt, 30% of the portfolio is generates high returns by playing in cash future arbitrage, participating in IPOs, buybacks and mergers.

Since the three strategies are not co-related, the overall volatility of the scheme comes down significantly. While it is ideal for investors who want to get into the stock market with low volatility, don't forget that it caps the upside in a runaway market. For example, its return is significantly lower than the Nifty in the past three years.

For further information contact Prajna Capital on 94 8300 8300 by leaving a missed call

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