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With investments of the capital protection segment restricted to highly rated bank deposits as per the regulations governing these funds in the local market, these funds are likely to maintain a conservative risk profile. CPFs are in their design, structured as closed end funds. Alternatively, the fund may have a very high back-end load to discourage redemption prior to maturity. Investors who may need ready access to their funds may need to be cautious when considering investing in a protected fund. Depending on how the fund is structured, early withdrawal may mean losing the principal guarantee and facing early withdrawal fees. However, assigned ratings only comment on value of principal at the time of maturity. CPFs can be structured in many ways to ensure protection of principal to investors; however these structures are modifications of two basic types; I. Funds can either be Basic Hedge II. Funds or Aggressive Hedge Funds
Introduction
The concept of capital protected funds is also known as structured funds. A structured product is a combination of traditional financial instruments and derivatives and it is engineered to widen the range of investment opportunities for institutional and retail investors (Das 2001, p.3). In other words, the structured product is a package solution that allows the investor to invest in a variety of assets, even ones that are not typically available to the ordinary investor. The products are designed so that they are easily tailored to investor demand and risk preferences and they can offer risk/return profiles that are not available to the investor through conventional investment in financial instruments.
The Capital Protected Fund is classed as a cautious investment, and it could be suitable as a medium term investment. The fund provides 100% capital protection at the end of a specified period, while offering investors the potential for growth linked to the stockmarket. Key points y y y y y y Protection date 29 January 2018 Easy to invest CPF20 Growth capped at 52% of the amount invested 3,000 minimum investment (1,000 via an ISA) Also available through an OEIC investment 100% participation in the growth of the FTSE 100
Who is it for? The Capital Protected Fund is suitable for clients y y y y With a minimum of 1,000 (ISA)/3,000 (OEIC) to invest Looking to invest for a fixed term (usually 5 or 6 years) Who want potential for growth linked to the stock market Who want the security that their original capital investment should be protected at the protection date, even when the markets are performing badly
Why recommend it? The Capital Protected Fund could be suitable for clients who want y y y y y The assurance that they should get back at least what they put in if they stay invested for the fixed term Exposure to the stockmarket with the knowledge that their capital should be secure if they keep their investment until the protection date The opportunity to potentially earn a higher return than a conventional fixed-term deposit To use their ISA allowance Potential tax advantages of investing via an ISA
When can you invest? During the cash investment period only. During the cash investment period and the two weeks that follow, the fund will invest in cash or similar investments through Scottish Widows Investment Partnership's Global Liquidity Fund. On the derivative date, the Growth Potential Period starts and the Fund will move from cash or similar investments to invest primarily in derivatives. The Fund will remain invested in derivatives until the protection date. eServices and tools Online services Complete a range of tasks quickly and easily using eServices y y Fund switching Change client details
. Tools and calculators Our online tools and calculators can help you make clear recommendations, including reports to support your recommendations and an audit trail for compliance purposes y y Select your risk profile View fund factsheets, fund prices and fund performance
Fund Statistics:
Fund Type Risk Level Open End - Capial Protected Minimal
Launch Date 18-May-08 Trustee Unit Types Central Depository Company A, B & C
Meezan Capital Protected Fund-I (MCPF-I), Pakistans first Shariah compliant capital protected fund, jointly developed by Al Meezan Investment Management Limited (Al Meezan Investments) Pakistans largest Shariah compliant asset management company and Meezan Bank, Pakistans first & largest Islamic Bank. MCPF-I is an open end mutual fund with a maturity period of three years and six weeks from the first day of IPO. MCPF-I provides an investment opportunity to investors who desire protection of their capital, are willing to invest for relatively longer periods and want to get benefit of potentially higher returns of the stock market. For capital protection 70% to 80% portion of the fund is placed through a Murabaha structure with Meezan Bank, which has a rating of A for long term and A1 for short term. The balance amount will be invested in Shariah
compliant equities in order to generate healthy returns. Based on the backtracking exercise of the fund structure, MCPF-I is targeting returns higher than the returns being offered by debt/ income funds and bank deposits. MCPF-I adheres to the Shariah guidelines laid by the Shariah Supervisory Board of Meezan Bank, chaired by Justice (Retd) Mufti Muhammad Taqi Usmani.
* If you sell units before maturity capital protection will not be available and redemption will be made as per prevailing NAV net of back end load as defined in the offering document. Please note that the element of capital protection should not be interpreted as a guarantee. **Is some haram income accrues to MCPF-I, it is segregated and donated to an approved charity in consultation with the Shariah Advisor. This purifies the income of MCPF-I.
conclusion A typical capital protected fund is a mutual fund, ETF or likewise, structured by a developer usually a large financing institution who enters into an agreement of the repayment of the principal and the appreciation in the underlying asset, or fund, to the issuer. The issuer usually markets the fund and administrates the investor relations. In order to invest in the capital protected fund, the investors buy shares in the fund according to the amount invested and the share price. The method that the developer uses for hedging its repayment risk is where the option-based strategy and CPPI comes into the picture