SBI Mutual Fund gets maiden Crisil rating

Rating agency Crisil has assigned the first-ever rating in India to a mutual fund scheme to be launched based on the dynamic portfolio insurance (DPI) structure. DPI is a form of dynamic portfolio rebalancing that is used to ensure capital protection at maturity in a mutual fund scheme.

Crisil has assigned a provisional 'AAA (so)' rating to SBI Capital Protection Fund - Series I; a scheme proposed to be launched by SBI Funds Management (SBIFMPL), the investment manager for SBI Mutual Fund.

"The assigned rating indicates the highest degree of certainty regarding timely payment of the face value of units to unit holders on maturity of the scheme. The rating is not a comment on the net asset value (NAV) of the scheme in relation to its face value at any time prior to the scheme's maturity date," a press release by Crisil said here.

The rating reflects the significant degree of capital protection expected /to be available to investors owing to the frequent rebalancing the portfolio will undergo.

If there is a sharp fall in the equity portfolio beyond a tolerance limit, as determined by CRISIL's analysis of historical equity price movements, conversion to fixed income securities of highest credit quality will occur, which will ensure protection of capital at maturity.

The trigger point of conversion to debt is sized in such a way that the future value of this debt at the time of redemption will be at least equal to or greater than the initially-invested amount.

In sizing this debt corpus, Crisil has factored into its analysis, the default risk of debt securities, the reinvestment risk of interim cash flows, expense levels and the tenor risk arising on account of the inability to fully invest the fund's corpus for the same time frame as that of the fund, the release said.