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Kotak Twin Advantage- Series II


Kotak Mahindra Mutual Fund has launched a close-ended debt scheme. Named as Kotak Twin Advantage Series II, the three-year close-end fund would be available for initial subscription till May 10, 2006.

The fund will invest in a portfolio of debt instruments and Nifty call options. As per the stated asset allocation, it will invest 75 to 100 per cent of its assets in debt and money market instruments, while up to 25 per cent in equity index options.

The maturity profile of the debt portion will be kept in line with the maturity profile of the fund, while the decision to invest in the Nifty call options will be taken on the basis of a financial model which the fund house has developed that takes into account factors like liquidity, volatility and other trends of the equity markets.

Basically, this will be a debt-dominated fund which will seek to capitalise upon the upside potential of the equities in a limited way. But while doing this, it will not invest directly in stocks like an MIP, but take the call options route to limit the downside. Therefore it would appeal to those investors who had been investing in debt funds till recently, but now find themselves short of ideas as the returns from vanilla debt funds have dried up. Conservative MIP investors may also find this fund interesting.

It would offer limited liquidity during the liquidity window of 25th March, 25th June, 25 September and 25th December each year. While the fund won't charge any entry load, an exit load of 3.50 per cent would be applicable on redemption within one year, 2.50 per cent between one and two years, and 1.50 per cent after two years but before maturity of the initial investment.