Fund of funds: UBL’s mutual fund IPO attracts Rs825 million

Principal Protected Fund II has attracted investments from various sectors.

KARACHI: UBL Fund Managers attracted a total investment of Rs825 million in the initial public offer (IPO) of its UBL Principal Protected Fund II (UPPF II), which took place on July 15-17, a company representative told The Express Tribune on Wednesday.

“UPPF II is yet another feat for us, as it has generated investments of over Rs825 million until the close of its IPO,” UBL Fund Managers Head of Marketing and Alternative Distribution Channels Raeda Latif said.

UBL Principal Protected Fund II’s IPO has attracted investments from the automobile, banking and power sectors in particular, she added.

In the past, UBL Principal Protected Fund I (UPPF I) and UBL Islamic Principal Preservation Fund I (UIPPF I) also generated Rs390 million and Rs764 million, respectively. The absolute return net-of-expenses for UPPF I between its inception on February 3, 2012, and July 23, 2013, has been 62%. It has been 19% for UIPPF I between its inception on April 29, 2013, and July 23, 2013.

Like UPPF I, UPPF II is also based on the principles of Constant Proportion Portfolio Insurance (CPPI), which allows investors to have complete exposure to the stock market, while ensuring that their principal amount remains protected. With a term period of two years, investment in this fund could be initiated with Rs10,000 only.

The CPPI methodology sets a floor on the rupee value of an investors’ portfolio and then uses risky and riskless asset classes to maximise exposure to equities during a bullish market, and minimise it in a bearish one. UPPF II is good for conservative investors, who do not want to risk losing their principal at the end of the 24-month fixed tenure of the fund, said Latif.

Investors are not allowed to enter UPPF II after the conclusion of its IPO. In case an investor needs to redeem before maturity, they may do so after incurring a 5% back-end load. However, UBL Fund Managers encourages investors to stay in the fund until its maturity in two years.

The benchmark for UPPF II will be the weighted average daily return of the KSE-100 Index and three-month deposit rates of AA- and above-rated banks, based on the fund’s actual participation in the equity and debt/income component.

Published in The Express Tribune, July 25^th, 2013.

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