Mumbai, Feb 27 (UNI) In a bid to generate healthy returns with lower volatility by adopting an hedging strategy in an otherwise highly volatile market, DBS Chola Mutual Fund today announced the launch of its open ended fund.
''Investors concerned about stock market volatility can consider investing with us since we would use an active hedging strategy to reduce the effect of market swings on the fund's long term performance resulting in more consistent returns with lower volatility, CEO Rajnish Narula said.
''Hedging implies protecting yourself from or minimizing your exposure to risk. Where stocks are concerned, the most apparent risk is that of price volatility. More specifically, it is the risk that the stock which you hold may fall or that you sell a stock and its price rises thereafter, rendering you a notional loss.
Futures and options are derivative products that help you to hedge your cash market positions, thus enabling one to protect ourselves from an erosion in the value of your cash market position due to some adverse price movement. The fund will use techniques and instruments such as index and stock futures and options to hedge, he explained.
''For example, if the fund manager feels that the market is overheated and is expected to move southward, he may invest in 'put' options to gain from an expected decline in the markets.
Accordingly, he will square off his positions when the market corrects and then buy equities at lower price levels. Using this investment strategy, the fund gains a better position to generate good returns during rising market conditions and counter-balances the erosion of capital when the markets go weak and risky, he elaborated.
The new fund offer (NFO) will open for subscription from March one till 23.
The scheme offers both cumulative and dividend options. Units will be offered at Rs 10 per unit plus applicable load. The minimum application amount during the offer period is Rs 5,000 and therafter in multiples of Re one. Investors can also invest through the Systematic Investment Plans (SIPs).
UNI
''Investors concerned about stock market volatility can consider investing with us since we would use an active hedging strategy to reduce the effect of market swings on the fund's long term performance resulting in more consistent returns with lower volatility, CEO Rajnish Narula said.
''Hedging implies protecting yourself from or minimizing your exposure to risk. Where stocks are concerned, the most apparent risk is that of price volatility. More specifically, it is the risk that the stock which you hold may fall or that you sell a stock and its price rises thereafter, rendering you a notional loss.
Futures and options are derivative products that help you to hedge your cash market positions, thus enabling one to protect ourselves from an erosion in the value of your cash market position due to some adverse price movement. The fund will use techniques and instruments such as index and stock futures and options to hedge, he explained.
''For example, if the fund manager feels that the market is overheated and is expected to move southward, he may invest in 'put' options to gain from an expected decline in the markets.
Accordingly, he will square off his positions when the market corrects and then buy equities at lower price levels. Using this investment strategy, the fund gains a better position to generate good returns during rising market conditions and counter-balances the erosion of capital when the markets go weak and risky, he elaborated.
The new fund offer (NFO) will open for subscription from March one till 23.
The scheme offers both cumulative and dividend options. Units will be offered at Rs 10 per unit plus applicable load. The minimum application amount during the offer period is Rs 5,000 and therafter in multiples of Re one. Investors can also invest through the Systematic Investment Plans (SIPs).
UNI
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