AMC Speak

Is this concept ideal for first time equity investors?

Ashish Ranawade, Chief Investment Officer, Union KBC MF

08th October 2015

In a nutshell

Experienced advisors usually get new MF investors to first enter into liquid funds, trigger a redemption after a few days and show new clients how the realized gains finally show up in their bank statements. This helps boost confidence of first time investors.

Union KBC has extended this logic with their Trigger Funds, which auto-redeem from equity plans on meeting a pre-specified target. This allows investors to realize their gains, see the money in their bank statements, develop confidence and perhaps on this basis, look at longer term commitments.

Could this be an ideal concept for first time equity investors, rather than asking them straight away to commit to long term investments when they are still unfamiliar with equity? Read on as Ashish takes us through Union KBC's Trigger Funds concept and investor experience so far with them.

WF: Union KBC has pioneered the concept of a Trigger Fund, which auto-redeems the entire amount on achievement of a certain target absolute return. What insights prompted you to consider this concept?

Ashish: The idea was to put gains / money back into the hands of the investor and forcing him/her to re-think about his/her portfolio allocation after having witnessed a 30% appreciation. It was our observation that investors are passive spectators when markets appreciate and often see their gains disappear as they fail to rebalance their portfolios. Compulsory winding up of the fund and returning the money back to the investors would also help address the issue that investors often forget to capitalize their gains in-spite of having a target return in mind. Trigger fund had an inbuilt calibrated target for such investors.

WF: How has the investor experience been with this product?

Ashish: Investors are happy as Union KBC Trigger Fund - Series 1 triggered within nine months reporting ~30% appreciation. The success of this product enabled us to launch the 2nd fund in this series in March 2015 and raise a significantly higher amount as compared to the first fund.

WF: Critics say that the concept of a Trigger Fund may promote short term and not long term investing. Would you agree with this assessment?

Ashish: Trigger Fund actually facilitates, rather, forces an investor to rebalance his portfolio after achieving his target return. The investor has the option to switch into other funds.

WF: Would you say a Trigger Fund could be an ideal first equity fund investment for a retail investor to help him gain confidence in equity funds?

Ashish: In a way yes, the Trigger fund allows the investor to 'REALIZE' the gains on his investments on an absolute basis rather than having notional returns on paper. Once the investor has had that positive experience, it should help increase the investor's confidence in equities going forward. In fact the fund is compulsorily wound up if the Trigger does not reach in the stipulated time frame, which also means that the investor does not have to wait endlessly for his target returns, he can re-evaluate his allocation after the stipulated time frame.

WF: What are your plans to promote the concept of Trigger Funds among retail investors?

Ashish: We will continue with the Union KBC Trigger Fund Series with launches at regular intervals depending on the market conditions.

The views expressed in this article are the views of the author and do not necessarily represent the views of the Company or its affiliates.

MUTUAL FUND INVESTMENTS ARE SUBJECT TO MARKET RISKS, READ ALL SCHEME RELATED DOCUMENTS CAREFULLY.

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