Thursday, March 02, 2006

Unusually Mutual Funds

I recently read many a reports published by international fund houses where they say, "we are going slow on India ... the breakneck speed of growth in foreign institutional investments in India is over ... we will continue investing in India but it'll be marginal of what was seen in the last two years ...."

Some people may agree, some may not ... but what should help us decide should not be optimism - but an assessment of other opportunities.

Within India, property is on a roll. People are adopting varied techniques to invest in properties and investment agents are coming up with enticing schemes. There is a current commodity bull (In an article, Marc Faber said that the bull run in commodities will continue till 2015) also.

Outside India investments is another area worth exploring .... read on. I've heard of the fantastic appreciations in property in the Gulf area esp. after expatriates have been allowed to purchase some property in UAE. If you are in Qatar, nothing better than buying Qatar petroleum. The US stocks are also seeing a wonderful surge. Property in Japan is on the rise after a decade of descendency.

I am picking one such investment which is Indian, yet alien of sorts.

Imagine a mutual fund based based on the Indian markets, with zero withholding taxes (conditions apply), zero entry load and unbelievably, 100% principal protection. It does exist, but in US dollars.

The Maharaja Note is an offering by ABN Amro N.V. The product is a 6 years maturity structure, USD denominated with 100% capital protected at maturity. It offers 80% participation in a basket comprising 50% HSBC GIF Indian fund and 50% JP Morgan Fleming Indian fund. The fund has done exceedingly well and is currently on an NAV of 144.50 i.e. 44.5% return on investment in the last 16 months.

I find this note very very interesting because this has been created for the extra-conservative investor (people like me). Two major reasons, why -

a) It gives you a 100% principal protection when held till maturity

b) The NAV is not calculated in the normal (Indian mutual fund) way. The fund follows something called the Asian indexing option i.e. the 6 yr period is divided in 24 quarters and the applicable NAV when you are exiting the fund is the arithmetic mean of all previous quarters. E.g. if the NAV for Q1 is 103, for Q2 is 110, for Q3 is 106 and for Q4 is 104 ... then the applicable NAV (if you are exiting) will be (103+110+106+104)/4 = 105.75. Some people may ask - why is that important? Imagine, you are removing the money, right after Q4 ... you would have got 104 dollars only. But because of the Asian indexing, you get 105.75 dollars. (so this is a trade-off, of sorts)

No risk !!! Thing again. Perhaps the biggest risk you take here is the movement in the US dollar. Available at around 44.50 rupees, the US Dollar (as most) is set to depreciate vis-a-vis most world currencies. If this turns true, all gains made can be negated by a weak dollar. In other words, for every Rs. 4.45 drop in the USD/INR rate, you lose 10%. In case you feel otherwise, i.e. the US economy will bounce back and actually gain in the long run ... then this is worth a try.

Donot forget to read and understand the term sheet given in the web page.

Though these opportunities have an NRI tag to it ... the indian resident is allowed to invest in some scheme (the RBI does allow USD 25,000 per calendar year to be invested abroad)

Learn more about structured products ... it will absolutely change your perspective of investment options. Start by reading an excellent summary given by ICICI Bank on the various categories of alternate investments it caters to.

You can view some excellent structures on:
1. ABN Amro
2. HSBC
3. UBS (see Luxemborg for maximum options)

6 Comments:

Anonymous Anonymous said...

You are really smart,i used to think that only i am smart and always hesitated in admitting the fact that the person in front is smart.....but keeping a constant track of ur blogs i have concluded that you are very very intelligent...... man you are bound to go places....being in a reputed institute like MDI and still finding time to pursur ur hobby of investing and then jotting them down on a blog in such a systematic way is a indication enough that you are a hard worker also....keep it my friend....

i will not disclose who i am
don't get distracted...
excellent job dude...

6:15 PM  
Blogger Shankar said...

[a] 5,6,4,4,4,3,3 ... this is the number of dot sequences you used in the comment above. This is a very interesting pattern - I could come across only 2 comments in a quick-peek who use 4 or more than 4 dots regularly.

[b] Plausible age group is between 18 to 24. In most probability, people over 25 use full sentence (with a full stop).

[c] Knowledge of MDI and more importantly the lack of time at the institute - indicates the blogger might have pursued a post-graduation in management

Anyway, this aint no puzzle. Sir, I left MDI (after passing with a CGPA of 6.39/10 - enough indication that I wasn't the smart one around)in 2002. Have been working for almost 4 years now.

Like to make money ... for the thrill of it !!! Period.

Warm regards
Shankar

10:09 PM  
Anonymous Anonymous said...

Shankar i sais that u r smart and i was not wrong....i am indeed 23 years old,though not a PG student.....yaar a CGPA is no indication of one's callibre....even in my UG we had a CGPA system but it hardly reflected the real talent....if you are talented and you work very very hard you get a good GPA nd if you r talented and u chill around ur GPA will be bad.....but then at the end of it u remain smart:)....anyways let me admire you and ur blogs.....

Thanks.

12:48 PM  
Anonymous Rick J said...

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2:18 PM  
Anonymous Rick J said...

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the indexes easily.

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RickJ

2:31 PM  
Anonymous Rick J said...

I have been following a site now for almost 2 years and I have found it to be both reliable and profitable. They post daily and their stock trades have been beating
the indexes easily.

Take a look at Wallstreetwinnersonline.com

RickJ

10:20 AM  

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