JM Fin launches portfolio scheme

At a time when the domestic markets are volatile, a leading financial services firm has launched a portfolio management scheme that offers both capital protection and capital appreciation "� a first in India.

JM Financial Services's PMS now on offer is aimed at local investors, which promises to offer 100 per cent capital protection as well as potential capital appreciation.

Though popular in developed markets, this is the first time in India that a company is offering a capital protection-oriented PMS scheme, which is based on Dynamic Portfolio Insurance (DPI), officials said.

DPI is a way of dynamically rebalancing a portfolio to ensure capital protection at maturity. The DPI methodology allocates portfolio wealth between equity funds and debt assets depending on expectations of market returns and volatility.

France's Societe Generale Asset Management Alternative Investment, which has been a leader in structured products, will act as a consultant and give recommendations and advice based on the DPI methodology.

Rating agency Crisil has assigned `AAAce (Capital Protection Oriented)' credit opinion for the scheme, which is equivalent to `AAA (so)', the first-ever credit opinion on a PMS product.

"We will be providing investors an opportunity to get an optimal exposure to a basket of leading diversified equity mutual fund schemes while simultaneously aiming to achieve 100 per cent capital protection," said Vipul Shah, association director and head (private wealth group) at JM Financial.

An interesting feature of the scheme, which has 5-year tenure, is that investors can withdraw the invested amount anytime during this period. Further, the scheme provides investors both Growth as well as Payout options.

While Growth option attempts to lock-in 85 per cent of the maximum portfolio value (lock-in feature) reached anytime during the 5-year tenure, the Payout option provides the lock-in feature in the 4th and 5th year of the scheme. Additionally, the payout option attempts to pay annually up to 7 per cent of the initial corpus for the first three years of the scheme.

Vipul Jhaveri, director, JM Financial, said the capital protection assured for the scheme was over and above the 2.5 per cent upfront fees plus the 2 per cent annual fees charged by the company. He said the investments are decided in consultation with both Societe Generale and Crisil.

The minimum ticket size for the scheme is Rs 50 lakh and the capital protection is assured only on maturity even while investors could exit the scheme at the prevailing NAV, at any time during the five years.