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Pioneer ITI
MF plans two schemes to protect investors from market volatility
Jai
Kumar N R
New Delhi, Jan 7: Even as market volatility played havoc
with equity investors for the past two years, Pioneer ITI Mutual
Fund (MF) has found a novel way to woo this beleaguered sector.
The MF is planning to come out with two first of their kind
schemes — Pioneer ITI PE Ratio Fund and Pioneer ITI Asset Allocation
Fund.
The open-ended schemes are being designed keeping in mind the
plight of hapless investors who enter in a bull phase and exit
in a bear phase. Says Pioneer ITI CEO Vivek Reddy, ‘‘There has
been a strong demand that fund managers should figure out a
way to shield investors from extreme market volatilities. Fund
managers should ideally reduce the equity component of a scheme
when the markets are at a peak so that the value of investors’
money is protected when the equities tank. Similarly, in bearish
markets, the scheme should be fully invested in equities so
that investors can benefit from the bull rally which follows
such a market.’’
However, the existing equity funds have a mandate to stay invested
in equities through all market conditions. ‘‘The solution of
this dilemma of sticking to the offer document, while yet being
able to sell out of equities, has led to the concept of PE Ratio
Fund,’’ Mr Reddy adds.
PE Ratio Fund, which will be passively managed, seeks to provide
risk-adjusted returns through a portfolio of equities and debt/money
market instruments. Its allocation to the asset class will keep
changing, based on the price-earning (PE) ratio of the benchmark
index, NSE Nifty.
The fund’s built-in buy/sell mechanism will automatically balance
its asset allocation based on the PE multiple of the target
index, depending upon which band the prevalent ratio falls in.
The scheme has defined six bands of PE ratio. The first band
is up to 12, under which 90-100 per cent of investments will
be equities and 0-10 per cent will be in debt.
If the market PE falls in a band of 12-16, 70-90 per cent of
the investment corpus will be in equities. Between 16-20, 50-70
per cent of assets will be in equities and 30-50 per cent in
debt. In the PE band of 20-24, 30-50 per cent of investments
will be stocks and 50-70 per cent in debt. Between 24-28, 10-30
per cent of assets will be equity and 70-90 per cent in debt.
Under the last PE band of above 28, 0-10 per cent will be in
equities and 90-100 per cent will be in debt.
The equity portion is passively managed and will be invested
in stocks that make up the NSE Nifty Index, in proportion to
their respective weightage. In terms of risk-adjusted returns,
this fund aims to give returns better than a fully invested
portfolio, according to Pioneer ITI MF.
The other scheme, Asset Allocation Fund, offers five plans.
The scheme is designed to benefit investors who want to reach
their financial goals without having to react to market vagaries.
The product also seeks to save the cost and time involved in
monitoring the market on a regular basis.
The five plans under the scheme will cover the entire spectrum
of risk/return profiles - from the most conservative to the
most aggressive investors. The first plan (Pure Growth) under
the scheme aims to invest 90 per cent in equity and the balance
in debt.
The other plans like Steady Growth, Balanced Growth, Conservative
Growth and Inflation Hedge will have 70 per cent, 50 per cent,
30 per cent and 10 per cent of the corpus in equities and the
balance in debt, respectively.
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