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Capital Protection

AMCs facing redemption pressure in case of unlisted capital protection funds are looking to list the funds

While capital protection funds from Franklin Templeton are listed on the exchanges, those from other asset management companies (AMCs) are not but provide an exit window. According to the guidelines, the AMC isn't required to make up the difference in the case of capital erosion. In the recent market turmoil, the funds not listed have been facing redemption pressure and are a threat to the underlying premise of 'capital protection'. Consequently, AMCs are contemplating listing as it will result in a transfer of ownership, keeping the unit capital constant (but you may find a buyer in a bearish phase).


Moving on, Franklin Templeton had launched capital protection funds last year and the combined AUM of these funds stood at Rs 642 crore (March 31, 2008). Post listing on the NSE, these funds were hardly traded. But since January 4, 2008, we noticed a rise in the fund price despite the low volumes. However, the tide has changed and the premium between the NAV and the price has shrunk considerably. The price of Franklin Templeton Capital Protection Fund 3Y (Dividend Option) was Rs 31.95, as on May 5, compared to Rs 248 in January 29, 2008. In 2008, the listed capital protection funds of Franklin returned a negative 3.16 per cent till May 8, 2008.



Price in 2008
  Jan-04  Feb-11  May-05  Return
FT CP 3Y Div 13.7 96.9 31.95 607.29
FT CP 3Y Gr 12.6 35.75 14.65 183.73
Franklin India Capital Protection - 3 Year - Dividend
NAV and Price Comparison