Kotak's twin advantage

NFO REVIEW

An encouraging response to Kotak Twin Advantage Fund Series II prompted Kotak Mutual Fund to launch Kotak Twin Advantage Fund-Series III.

The Kotak Twin Advantage Fund Series II collected about Rs 96 crore and its NAV has never fallen below Rs 10 even after the correction in the market.

"After the recent correction, investors face a dilemma""Do they invest or avoid the equity market? Fundamentals of corporate India and macro economy continue to be promising whereas, volatility in equity markets, rising interest rates globally and high crude prices are a deterrent for fresh investments in equity. Kotak Twin Advantage Fund Series III is a product that aims to provide safety of debt with payoff of equity. It should deliver returns in line with equity but will avoid risk of the equity market," explains Sandesh Kirkire, CEO, Kotak Mutual Fund. 
 
Kotak Twin Advantage Fund-Series III is a three-year closed-ended debt scheme. The investment objective of the scheme is to generate income by investing in debt and money market instruments and to generate capital appreciation by investing in equity index options.

"The fund will invest an amount in debt so that the principal is recovered. Significant investment will be in debt and money market instruments and residual will be in Nifty options. We are using Nifty call options as it is the most liquid," says Kirkire.

Explaining the reason why they will use options and not futures, Kirkire says, "In options, the RoI is much higher. Also, the loss in case of options is limited as you lose just the premium but the gain has a multiplier effect."

The fund is benchmarked against Crisil MIP Blended Index. The new fund offer is open from July 27 to August 25, 2006.