Aim to preserve initial capital outlay and endeavor to deliver performance better than fixed income instruments of similar tenure through a dynamically balanced asset allocation mix consisting of equity and money market instruments.
Portfolio Characteristics:
In a trending bull market (without too many reversals), the Asset Guard is expected to do well as the investor is buying more shares as they rise
The portfolio seeks to perform at least as well as the floor, even in a severe bear market. Such a strategy puts more and more into cash as market declines, reducing the exposure to the market to zero as the portfolio approaches the floor
Investment Approach:
A structured portfolio concept based on the Constant Proportion to Portfolio Insurance (CPPI) strategy
Based on the CPPI strategy, the corpus is divided into two components viz. Equity component and the risk-free floor value
To implement the CPPI Strategy, the Asset Guard Portfolio sets a defined floor value below which, the portfolio value is not allowed to fall.
The protected floor progressively increases in value at prevailing market yield driven by balance term of the Portfolio
The floor value is defined as a Value at Risk (VaR) measure at 99% confidence interval at normal conditions as well as at stress testing
The floor keeps shifting (dynamic floor) based on interest rates and 5 year forward yield curve
The floor earns money market instrument yield
The equity portion may consist of a basket of portfolios to address and mitigate attendant risk
The basket may consist of a passive portfolio and an actively managed portfolio
The passive portfolio may be represented by Sensex/ Nifty indices to achieve market beta
The actively managed portfolio shall fetch the alpha
Investor profile:
Conservative investors who want to participate in the market but fear capital erosion
Investors who are dissatisfied with low bank deposit yield and losing faith in fixed income instruments due to low yield, which leaves very little real return
Who seek performance between fixed deposit yield on the lower side and normalized equity yield on the upper end over and above principal protection
More aggressive investors who seek to diversify their investments into a relatively lower risk investment option
Portfolio Variants
The Asset Guard Portfolio is offered in two different time horizons; 5 year term and 3 year term
5 year term: where we endeavor is to preserve capital to 100% of the principal value
3 year term: where we endeavor is to preserve capital to 80% of the principal value
Benchmark Index:
5 year Treasury Yield (Bloomberg Code C1235Y index)
