1435H / 2013G

Capital Protected Funds
A Global Survey

© Islamic Development Bank, 2016
 King Fahd National Library Cataloging-in-Publication Data

Islamic Development Bank
          Capital protected funds: A global survey./ Islamic
   Development Bank . – Jeddah, 2016

     ISBN: 9960-32-318-8

     1-Funds   2-Investments   3-Islamic Finance  l-Title
     332.606 dc  1437/7782

     L.D. no. 1437/7782
     ISBN: 9960-32-318-8

All rights reserved. No part of this publication may be reproduced or distributed in any form or
by any means, or stored in a database or retrieval system, without the prior written permission
of the Islamic Development Bank.

The views and analyses presented in this Report do not necessarily reflect the views or official
positions of the Islamic Development Bank Group.

FOREWORD

The Islamic Development Bank is committed to support comprehensive human development in
its Member Countries using Islamic products and instruments. As the global financial crisis has
shown, new products need to be ethically anchored to serve the real economy, or otherwise
they would become a liability on the society at large.

Exploring new financial instruments for supporting development, therefore, is a primary objective
in our endeavor to serve our Member Countries, and to lead the Islamic financial industry to new
heights in the 21st century.

An important step in this direction was the establishment of the Financial Product Development
Center (FPDC) in 1432H, 2011, to act as a focal point for product innovation across IDBG and
build upon the pioneering role of the IDB Group in promoting and expanding the Islamic financial
industry.

The Center has since embarked on various initiatives for new product development, including:

1. Developing a Business Process for new product development.

2. Building capacity of product developers within IDBG.

3. Designing new financial products.

This Survey on Capital Protected Funds provides a valuable input for the design of innovative
products. The Report surveys a large sample of capital-protected funds, both Islamic and
conventional, in various regions across the globe. It encapsulates the definitions, structures and
the hedging mechanisms used by the surveyed funds. This, we hope, would provide a good
background and a base to launching efforts for designing new products that carefully manage
risks without jeopardizing incentives and responsibilities.

The ultimate objective is to inform the Islamic financial industry and facilitate progress in finding
new Shariah-compliant ways to serve the dynamic needs of our Member Countries. I believe this
Survey is another solid stride in that direction.

Dr. Abdul Aziz Al-Hinai

Vice President, Finance
Islamic Development Bank

IIICapital Protected Funds Survey

Capital Protected Funds Survey | V

This Report is a product of a comprehensive and meticulous survey conducted by Amal El-
Haouti, who was then with the Deloitte Centre of Excellence in UAE. After completing the
survey, Sister Amal prepared the first draft of the full report.

The first draft was then carefully reviewed by Dr. Amine Bin Ammar, who was then an intern
at the Financial Product Development Center.

The staff at the Center then extensively reviewed, edited and finalized the report for publishing.

The Center would like to accord its deep appreciation to each and all of these professionals
who helped to complete this project, for their gracious efforts and valuable contributions.

ACKNOWLEDGEMENTS

Contents

I. Introduction .................................................................................................................................................... 1

1. Objective of the survey .............................................................................................................................................. 1

2. Research methodology .............................................................................................................................................. 2

3. Delimitations ...................................................................................................................................................................  3

II. Definitions and rationale behind capital protected funds ........................................................ 5

1. Funds’ terminology ...................................................................................................................................................... 5

a. Investment funds can be found worldwide, but under different names and structures .... 5

b. Investment funds classifications  .................................................................................................................... 5

c. Net Asset Value (NAV) ........................................................................................................................................... 6

2. Capital Protected Funds ............................................................................................................................................ 6

a. Concept .........................................................................................................................................................................  6

b. Investing in capital protected funds .............................................................................................................. 7

Closed-end fund ....................................................................................................................................................... 7

Open-ended fund .................................................................................................................................................... 7

3. What makes capital protected funds so appealing? ................................................................................. 7

a. Understanding investor’s psychology ........................................................................................................... 7

b. Advantages of capital protected funds ........................................................................................................ 8

III. Historical background ............................................................................................................................ 11

1. The 1987 equity market crash: Portfolio insurance Vs. Capital protection ................................ 11

2. The second generation of Capital Protected Funds ................................................................................ 12

3. Change in the landscape of capital protected products after the Global Financial Crisis ...... 13

IV. Protection Techniques ............................................................................................................................. 15

1. 1st generation: Bond and Call option .............................................................................................................. 15

2. 2nd generation: Constant Proportion Portfolio Insurance (CPPI) .................................................... 16

3. 3rd generation: Dynamic Hedging .................................................................................................................... 17

4. Put options as an additional protection layer ............................................................................................ 18

5. Products and protection mechanisms – Which ones to choose? ................................................... 18

V. Capital protected funds: Potential Pitfalls .................................................................................... 19

1. Do protected funds have any added value? ................................................................................................ 19

2. Inflation impact ...........................................................................................................................................................  19

3. Benefits and costs of capital protection ........................................................................................................ 20

4. Opportunity cost ......................................................................................................................................................... 20

5. Replacing downside risk with counterparty risk ....................................................................................... 21

6. One capital protected product does not fit all ........................................................................................... 21

VI. Main findings of the survey ................................................................................................................. 24

1. Europe ..............................................................................................................................................................................  24

a. A leading market for capital protected funds ........................................................................................ 24

b. Survey’s interpretation ....................................................................................................................................... 26

2. America ............................................................................................................................................................................ 28

3. Asia ..................................................................................................................................................................................... 30

a. An outlook on Asian Capital Protected Funds market ...................................................................... 30

b. Survey’s interpretation ....................................................................................................................................... 32

4. MENA ................................................................................................................................................................................ 35

a. MENA investment funds landscape ............................................................................................................ 35

b. Survey’s interpretation ....................................................................................................................................... 35

5. Islamic Capital Protected Funds ......................................................................................................................... 37

a. An outlook on Islamic Capital Protected funds industry ................................................................. 37

Structures .................................................................................................................................................................. 37

A historical insight ................................................................................................................................................ 38

Issues and Challenges ........................................................................................................................................ 39

b. Survey’s interpretation ....................................................................................................................................... 39

VII. Survey of European Protected Funds ............................................................................................... 44

1. Funds screening -Methodology .......................................................................................................................... 44

2. Survey’s selection ....................................................................................................................................................... 44

3. Final selection ............................................................................................................................................................... 45

4. Survey results ...............................................................................................................................................................  47

a. The approach ........................................................................................................................................................... 47

b. Funds’ profiles ........................................................................................................................................................  48

Scottish Widows Capital Protected 10 ...................................................................................................... 48

HSBC Capital Protected 12 Retl ..................................................................................................................... 51

IFDS Omnis JP Morgan Protector 80 2 A .................................................................................................. 54

CMIG GA 90% Flexible ....................................................................................................................................... 57

Archimedes Invest Plus Fund - CHF ............................................................................................................ 59

Atout Prem’s Actions .......................................................................................................................................... 61

BNP Paribas Cliquet US ...................................................................................................................................... 63

DMC Dyn Flooring Fd Expo Bonds Europe DF R EUR ........................................................................ 66

Fortis B Fix 2008 Alpha Plus 01 Dis ............................................................................................................. 69

Pioneer Funds Austria -Trend Bond A ....................................................................................................... 71

c. Summary of Europe Protected Funds Survey ........................................................................................ 73

VIII. Survey of American Protected Funds ............................................................................................... 77

1. Funds screening -Methodology ..................................................................................................................... 77

2. Survey’s selection .................................................................................................................................................. 77

3. Final selection .........................................................................................................................................................  79

4. Survey results ...............................................................................................................................................................  81

a. The Approach ..........................................................................................................................................................  81

b. Funds’ profiles ......................................................................................................................................................... 82

LVIP Protected Profile 2010 Fund; Standard Class ............................................................................. 82

LVIP Protected Profile 2010 Fund; Service Class ................................................................................. 83

Oppenheimer Principal Prot Main Street Fund III;A ......................................................................... 85

Janus Protected Series - Growth A .............................................................................................................. 87

National Bank Protected Growth Balanced Fund ............................................................................... 89

Covington Venture Cap Protected Sr IX .................................................................................................... 91

Citifirst Ibovespa Capital Protegido II FI Mult ....................................................................................... 93

Bradesco FI Mult Principal Protegido ........................................................................................................ 95

Larrainvial Proteccion APV-A .......................................................................................................................... 97

Fondo Santander Inversion de Renta Variable STGAR-1 B1 .......................................................... 99

Fondo BBVA Bancomer Estructurado Inversion TRIPLE1 GB ..................................................... 101

c. Summary of America capital protected funds survey .................................................................... 103

IX. Survey of Asia Protected Funds ....................................................................................................... 107

1. Funds screening: Methodology ....................................................................................................................... 107

2. Survey’s selection .................................................................................................................................................... 108

3. Final selection ............................................................................................................................................................ 110

4. Survey results ............................................................................................................................................................. 113

a. The approach ........................................................................................................................................................ 113

b. Funds’ profiles ...................................................................................................................................................... 114

Liontamer FALLEN ANGELS Series1 (Trust26)-Booster .................................................................. 114

Westpac KiwiSaver-Capital Protection Plan 1 .................................................................................... 116

Invesco Wholesale Protected Growth .................................................................................................... 118

Pre Select 100%+ Cap Protected Growth 1 ......................................................................................... 123

STRIPES Global Financial Titans ................................................................................................................. 125

GreatLink Choice (Dec 2013) ....................................................................................................................... 129

OSK-UOB Capital Protected Gold Guru Fund ..................................................................................... 131

RHB Dynamic Oil-Gold Capital Protected  ............................................................................................. 133

PNB Structured Investment ......................................................................................................................... 135

Faysal Savings Growth Fund ......................................................................................................................... 138

KASB Capital Protected Gold Fund ........................................................................................................... 140

SBI Capital Protection Oriented Fund - Series I ................................................................................. 142

Sundaram Capital Protection Oriented Fund 5 Years .................................................................... 144

Birla Sun Life Capital Protection Oriented Fund - Series I ........................................................... 147

Axis Capital Protection Oriented Fund - Series I ............................................................................... 149

c. Summary of Asia protected funds survey ............................................................................................. 151

X. Survey of MENA Protected Funds ................................................................................................. 158

1. Funds screening - Methodology ...................................................................................................................... 158

2. Survey’s selection .................................................................................................................................................... 158

3. Final selection ............................................................................................................................................................ 159

4. Survey results ............................................................................................................................................................. 160

a. The approach ........................................................................................................................................................ 160

b. Funds’ profiles ...................................................................................................................................................... 161

GIC Gulf Bonds Fund ........................................................................................................................................ 161

Markaz Capital Preservation Portfolio .................................................................................................... 163

Al Mal Liquidity Fund ....................................................................................................................................... 165

Commercial International Bank Fund IV (Hemaya) ......................................................................... 167

Crédit Agricole Mutual fund number 4 (Al Thiqa)  .......................................................................... 169

Axis Capital Protégé .......................................................................................................................................... 171

c. Summary of MENA protected funds survey: ...................................................................................... 173

XI. Survey of Islamic Protected Funds ................................................................................................. 175

1. Funds screening - Methodology ...................................................................................................................... 175

2. Survey’s selection .................................................................................................................................................... 175

3. Final selection ............................................................................................................................................................ 177

4. Survey results ............................................................................................................................................................. 178

a. The approach ........................................................................................................................................................ 178

b. Funds’ profiles ...................................................................................................................................................... 180

NBK Islamic Ijarah fund VIII .......................................................................................................................... 180

Global Islamic Fund .......................................................................................................................................... 184

Meezan Capital Protected Fund - II .......................................................................................................... 186

Meezan Islamic Income Fund ...................................................................................................................... 188

HBL Islamic Money Market Fund .............................................................................................................. 190

AMB Dana Aqeel-Capital Protected Fund ............................................................................................ 192

ASM Syariah Capital Protected Sector Linked Fund  ...................................................................... 194

CIMB-I Commodities Structured Fund 2 ............................................................................................... 196

Almanarah Conservative Growth Fund ................................................................................................. 198

HSBC Amanah Multi-Assets Defensive Fund ...................................................................................... 200

International Trade Finance Fund (Sunbullah USD) ........................................................................ 202

Shuaa Murabaha Fund  .................................................................................................................................. 204

Al-Murabih SAR Murabaha Fund .............................................................................................................. 206

Al Hadi Sharia Compliant Fund ................................................................................................................... 208

c. Summary of Islamic Capital protected funds survey ....................................................................... 210

d. Summary .................................................................................................................................................................  213

XII. Conclusion ................................................................................................................................................. 214

XIII. Annexes ....................................................................................................................................................... 216

1. Participation Rate .................................................................................................................................................... 216

2. Lookback option ....................................................................................................................................................... 217

3. Lipper .............................................................................................................................................................................. 217

a. Lipper Leader Rating System ............................................................................................................................. 217

b. Total Return ................................................................................................................................................................. 218

4. Morningstar ................................................................................................................................................................ 218

5. Exchange rates ..........................................................................................................................................................  219

XIV. Key terms .................................................................................................................................................... 220

XV. List of Tables ............................................................................................................................................. 222

XVI. Table of Figures ....................................................................................................................................... 223

XVII. References ............................................................................................................................................. 224

1. Books .............................................................................................................................................................................. 224

2. Papers and articles .................................................................................................................................................. 224

3. Web links ...................................................................................................................................................................... 225

IntroductionI.

When markets suffer a sustained downturn and the outlook becomes uncertain, investors
instinctively rush to safety. This rule was confirmed during the global financial crisis, when capital
protected funds were brought back to the front of the scene as those who suffered huge losses
became more demanding on capital preservation. The popularity of these products also reposes
on their ability to generate higher returns compared to fixed income securities, especially in a
low interest rate environment, and to provide a safe exposure to eventual upswings in the equity
market.

Capital protected funds are recognized internationally as a bear market phenomenon.
It is noteworthy that they have also evolved and gotten ripe after each crisis. In the aftermath
of the 2008 financial meltdown, manufacturers of capital protected products proved to be
more responsive to investors’ needs; they came up with innovative and more customer-centric
features.

This survey attempts to throw some light on what became a fashionable investment
option and offers a broad view on how capital protected funds operate globally. It also attempts
to assess the level of diversity and innovation within these products and, where possible, to
determine their peculiarities in each region.

Objective of the survey1.

The survey aims to report the salient features of capital protected funds worldwide,
including the Islamic ones. For each region of the globe, it gauges the peculiarities for the best
performing capital protected funds including:

Type of assets;•
Whether closed or open-ended;•
Valuation method of the units;•
Fund size expressed in terms of “Total Net Assets”.•

These elements would guide in addressing some questions. Initially, we proceed per region:

Is there a predominant structure of capital protected funds? For example, a regulatory •
restriction that imposes a closed-end structure or open-ended funds, whichever is found
to be more popular in a particular area.
Whether there is an outstanding protection technique, or on the contrary, all techniques •
are equally important?
What is the degree of sophistication of the protection mechanisms: whether different •
techniques are combined or some innovative features are used?
The type of assets is closely correlated with the protection technique. It could also give •
an indication on the risk appetite of a particular fund or of a whole region at a bigger
scale, if there is a noticeable trend.
How liquid are capital protected funds? This question could be tackled by looking at:•

Redemption/ Subscription frequencyo

Listing in secondary marketo

Is there a prominent valuation method? •
Is there a particular remark concerning the size of funds within a given region: whether •
they tend to be of a small size or otherwise?

1Capital Protected Funds Survey

1 MENA short for “Middle East and North Africa”.

Afterwards, the survey makes an inter-regional comparison with regards to the features
of capital protected funds. We will compare the major trends and, more importantly, examine
the degree of sophistication of each geographic area.

This extensive study of conventional capital protected funds serves as a reference from
which we could critically approach the Islamic protected funds industry. For instance, the findings
of Islamic protected funds survey may help us in:

Identifying if any conventional protection techniques have been adapted to the Shari’ah •
requirements.
Finding out whether they mimic the conventional industry so far, or they follow their •
own trajectory.
Assessing the diversity of the protection techniques and the types of assets as compared •
to their conventional counterparts.
Determining whether they allow as much flexibility as their conventional peers or do •
they just stick to the framework imposed by some Islamic contracts and hence, need to
innovate and design more client-oriented features.

Research methodology2.

To address the stated questions, we proceed in two steps. The first part of this research
is dedicated to recalling the basics and presenting the main overall findings. This is presented in
the first five chapters, including this Introduction. Chapter 2 introduces general aspects about
investment funds, the concept of capital protected funds and the related investment process.
It also elaborates on how investor psychology contributes to the popularity of protected funds
and the advantages attributed to these particular products. Chapter 3 provides a brief historical
background on capital protection: how it evolved over time and the major events that shaped
the main product varieties. While explaining the evolution of protected funds industry, Chapter
3 also highlights the three most popular protection techniques: the Option Based Strategy, the
Constant Proportion Portfolio Insurance and the technique based on Dynamic Hedging. Chapter
4 presents more insight on these techniques. It details the features, mechanisms and the pros
& cons of each technique before concluding with an overall comparison. Chapter 5 is intended
to play the devil’s role.. It provides the perspective of those who oppose capital-protected funds
and argue on their uselessness as well as those who warn about the potential pitfalls. Chapter 6
highlights the main findings and interpretations revealed by the first part of the research. Those
who wish to gain an extensive view on the survey should refer to the second part.

After introducing the necessary tools for understanding and interpreting the findings,
the capital protected funds survey is tackled in the second part. In this part, conventional and
Islamic funds are treated separately. Since the first group counts a considerable number of funds,
the survey is conducted with a regional focus in order to study how the capital protected fund
industry evolved in different places of the world. The number of funds to be scrutinized was
attributed per region, depending on the financial activity and number of countries within the
area. As a result:

10 funds were allocated to Europe;•
11 funds to America;•
17 funds to Asia and Pacific and•
6 funds to MENA• 1.

Since Islamic funds are generally concentrated in specific countries like Pakistan, Malaysia
and the Middle East, the number of capital protected funds is limited. For this reason, the survey

2 Capital Protected Funds Survey

1 http://www.lipperleaders.com/
2 It is also referred to in this survey as “pre-selection sample”

is conducted at once in the same chapter. The research approach is globally the same for both
Islamic and conventional funds when we proceed per region:

We look for renowned fund screeners and databases and see whether they list and rank 1.
capital protected funds.
If yes, we select the best performing funds according to the criteria of the fund’s screener. 2.
Lipper, a Thomson Reuters Company, for instance, rates funds based on “Total Return,”
i.e. income from dividends and interest as well as capital appreciation, compared to a
group of similar funds.1

If the database does not propose any ranking or if we have constituted our own database 3.
by mere internet browsing, we may select our funds based on Year-To-Date “YTD” rate
of return, if available, or Return Since Inception otherwise.
After establishing a preliminary list4. 2, the selection will be further refined to reach the
quota previously established for each region.
The final list will be set taking into account two factors: the investment fund activity of 5.
the respective countries within the region and the diversification of protected funds
investment strategies.
Ultimately, for each fund on the list we look for the elements stated in “Objective of •
the survey”

Date of establishment;o

Type of assets;o

Whether it is closed or open;o

If open, the frequency of redemption and subscription in the fund after being o
launched;

Valuation method of the units;o

Secondary trading of the fund units, if any , ando

Fund size expressed in “Total Net Assets”.o

These would be summarized and used to elaborate the overall conclusion.

Delimitations3.

There are different aspects to cover when studying capital protected funds. Those that
have been addressed so far respond to specific needs, namely those expressed in “Objective of the
survey”. However, the research could be extended to include other elements as well, namely:

The investment term of the fund;•
The fund’s fees: like sales charges paid upfront and annual management fees (for •
example 2.00% p.a on the fund’s capital);
Possibility of withdrawals before maturity: either partial or total;•
Any redemption fees;•
Any distributions;•
Any guaranteed returns;•

With these additional elements, we could examine and compare the costs involved in each
of the three major protection techniques. Then we could try to assess the level of protection fees
per region. It will also be possible to verify whether the new funds, especially those established
post-crisis, require lower fees or not. Flexibility of withdrawal is a worthy criterion to identify
the third generation of capital protected funds launched after the financial crisis. Analyzing the

3Capital Protected Funds Survey

distributions of returns would help to recognize the funds that propose innovative features and
whether they are located in specific regions or restricted to newly established funds. All these
elements could stimulate and feed thoughts for future research.

4 Capital Protected Funds Survey

1 US Security and Exchange Commission:
http://www.sec.gov/investor/tools/mfcc/mutual-fund-help.htm
2 Russel, R.,(2006), “An Introduction to Fund Management”, John Wiley & Sons, Ltd., Chichester, page 17.

Definitions and rationale behind capital protected fundsII.

Capital protection can be applied to different types of funds. Therefore, we first define
investment funds, and then elaborate on the concept of capital protection and the related
investment process. Finally, we try to explain investors’ attraction towards capital protected
funds and list down some advantages attributed to these products.

Funds’ terminology1.

Investment funds can be found worldwide, but under different a.
names and structures

According to the U.S. Securities and Exchange Commission, a mutual fund is a company
that brings together contributions from many investors to invest in stocks, bonds or other
assets. The combined holdings a fund owns are known as its portfolio. Each investor in the
fund owns shares, which represent a part of these holdings1. Under this collective investment,
investors participate in a larger and more diversified portfolio and benefit from a specialized
and professional management which would not be possible otherwise. Mutual funds can be
proposed by insurance companies, banks, asset managers or investment companies.

In the U.S., collective investment schemes or investment funds can be classified as
mutual funds, unit investment trusts or closed-end funds. In the UK, they could be categorized as
investment trusts, unit trusts, common investment funds and open-ended investment companies.
The most popular term in the EU to designate collective investments is “UCITS” which stands for
Undertakings for Collective Investment in Transferable Securities.2

Investment funds classifications b.

Mutual funds can be classified according to the asset type: for instance equity funds,
bond funds, money market funds or mixed assets funds, to name a few.

The classification can be made according to the objective of investment; namely income
funds, growth funds, index funds. Hedge funds are also a type of mutual funds that use derivatives
and short selling, amongst other strategies, to operate efficiently in both rising and declining
markets.

Another distinctive feature is the structure of the fund. When a fund invests in other
funds, it is called a “fund of funds”. A fund that other funds invest in is called a “master fund”. An
“umbrella fund” refers to a collective investment scheme, which is a single legal entity but has
several distinct sub-funds which, in effect, are traded as individual investment funds.

While considering the legal structure, funds can be structured as trusts, partnership or

5Capital Protected Funds Survey

companies as they may have joint ownership structure with no legal personality. The Exchange
Traded Fund (ETF) is a special case where the fund tracks an index but is bought and sold as a
listed company.1

A fund is said to be “open-ended”, when it has a variable capital or when there is no
restriction on the number of shares the fund will issue. If the demand is high enough, the fund
managers may continue to issue shares. These funds could also redeem shares if investors wish
to sell them back. Sometimes, when the fund management determines that the fund’s total
asset has become too large to realize its stated objective, the fund will be closed to new investors
or even to new investments by the existing investors.

On the other hand, “closed-end” funds have a fixed number of shares outstanding and
do not redeem shares the way “open-ended” funds do. Closed-end funds are similar to stocks:
they issue a fixed number of shares to the public in an Initial Public Offering (IPO). The funds’
shares are then bought and sold on a stock exchange and they are not obligated to issue new
shares or redeem others as the open-ended funds do. The unit price of a closed-end fund’s share
is entirely determined by the market.

Net Asset Value (NAV) c.

As mutual funds pool together investors’ contributions, there should be a way to
determine the investors’ claims over the fund’s net assets2. As a matter of fact, ownership is
proportional to the number of shares held and the value of each share is called the Net Asset
Value “NAV”.

Net Asset Value Per Share =
Market Value

 Fund
− Liabilities

 Fund
             Number of Shares issued

The NAV per share is the current market value of the fund’s holdings minus its liabilities
divided by the number of shares issued. The fund could be valued on a daily, weekly or monthly
basis or otherwise, depending on the fund’s policy3 or on the rules imposed by the relevant
financial authorities4.

Capital Protected Funds2.

Concepta.

A Capital Protected fund can be one of any of the investment funds described above.
Its peculiarity lies in the protection strategies that limit the downside risk of the investment
while trying to realize profits from rising markets. These strategies allow investors to retrieve,
at maturity, their initial investment or a certain percentage of it (as stipulated in the protected
fund prospectuses and documentations) even if the markets bottom out. Generally, returns are
generated by investing in (high return) risky assets and the protection is ensured through the
investment in (low return) safe assets.

1 Ibid, page 23.
2 For more details refer to the U.S. Securities and Exchange Commission: http://www.sec.gov/answers/nav.htm
3 Ibid.
4 For the example of France, refer to:
http://www.morningstar.fr/fr/news/article.aspx?articleid=58117&categoryid=73

6 Capital Protected Funds Survey

These funds are marketed under a variety of names, for instance “principal protected
fund”, “capital preservation fund” and “principal protection note,” etc. They can also be referred
to as “structured funds”. As a reminder, a “structured product” combines a traditional financial
instrument and derivatives to deliver a highly customized risk-return objective to individual
investors, which is not possible with the usual financial instruments. In fact, capital protected
funds may have recourse to derivatives and other traditional assets (bonds for example) to
provide the desired level of capital protection.

Capital protected funds are often confused with capital guaranteed funds. The difference
actually lies in the risk that the investors are exposed to in receiving their initial investment. A
capital guaranteed fund is guaranteed by the issuing financial institution, for example a fund
house or a bank. In such a case, the investors are guaranteed to receive their initial investment
and they could only be exposed to the solvency risk of the issuing institution. Capital protected
funds are not guaranteed by a particular institution; the investors might not receive their initial
investment in full. If the fund issuer uses safe debt-assets instruments, the subsequent risk is the
one linked to the bond issuer.

Investing in capital protected fundsb.

Closed-end fund

When a closed-end fund is launched, the units are proposed to the investors for a limited
period, the initial offering period, after which the fund is closed to new investments. The offering
documentations and the fund construction could be subject to changes during this period. The
fund documentations disclose the fund structure, the fund objective, the investment strategy,
the fees structure and other relevant information. Right before the end of the offering period,
the fund management finalizes the portfolio construction and the internal procedures.

In closed-end funds, the investors are supposed to hold their shares to maturity to benefit
from capital protection on their initial investment. If the units are sold prior to the maturity
date, the protection feature will be lost. Besides, a fee is imposed on investors in case of early
redemption. By the end of the fund’s tenure, investors can either reinvest in the fund or redeem
their shares to cash the benefits, if any.

Open-ended fund

The issuance of new units, for an open-ended fund, is made during the initial offering
period in which units will not be redeemed. The fund’s documentation is also preliminary and is
subject to eventual changes by the end of the offering period.

Subsequent to the first offer, the fund shall issue and redeem shares on a continuous
basis. Units can be purchased at the offer price and redeemed at the redemption prices set by
the management and based on the Net Asset Value (NAV). Similar to the closed-end funds, most
of the open-ended funds suspend capital protection if units are redeemed before the minimum
period set by the fund. Besides, a fee could also be charged for early redemption.

What makes capital protected funds so appealing?3.

Understanding investor’s psychologya.

In a bullish market, it is not rational to buy at unusual high prices, since prices are more
likely to go down. In such times, it is probably better to sell out. In contrast, when prices are low,

7Capital Protected Funds Survey

1 Fund Focus, Issue3, November 2008, Back to basics-Capital protected products, page 8
http://www.fundsfocus.com.au/newsletter/November2008/newsletter8.html
2 Fund Focus, Issue3, November 2008, The Psychology of investments-Are we forced to repeat the same mistake,
page 3
http://www.fundsfocus.com.au/newsletter/November2008/newsletter3.html
3 Chaplin, D., (2010), “Lock-Up Options”, Capital Protected Products Odyssey Asset Financial Review, page 6
https://adviser.axa.com.au/idc/groups/public/documents/system/axa_040113.pdf

and they are more likely to rise, it is better to invest. Hence, it seems odd to head for safety and
to pay extra fees for downside protection when markets may not go down any further; while
it makes more sense for the investor to look out for better opportunities. Yet, selling capital
protection becomes a hard task during market peaks; although investors are supposed to prevent
their capital from any eventual drop when there is still something to protect1. In an attempt
to provide some explanations to such irrational behavior, market experts analyzed investors’
psychology and found out the following:

We are emotional investors: Our brain is structured in a manner that decision does not depend
solely on abstract rational considerations of investment choices. Meaning that our decision
making process usually involves emotional inputs that may push us to buy when markets are
bullish and to adopt a cautious behavior or to sell when they start to fall.

We usually follow the trend: The actions of the investor are influenced by those of people
around him. Indeed, when thousands of investors support each other’s’ decisions, it creates a
bubble. Hence, in falling markets, rationality dictates that we should hold tight our investments,
but we start selling when everyone around us is doing the same.

Finally, we always favor certainty: We require certainty, especially in the time of stress as it
becomes easier for us to comprehend. And we tend to be less worried about our investments
when markets are showing positive results.

Capital protected products seem to offer a good “Greed & Fear” trade-off: By following our
natural instinct to favor certainty, capital protected products allow us to invest when markets
are falling, or to remain invested when we would normally sit on the sidelines watching the
opportunities pass by being too cautious to seize them. By removing the fear associated with
investing in discounted markets, the brain would be able to make rational investment decisions
without the impact of the emotional inputs.2

Rationally, it makes no sense to head for downside protection in distressed markets:
the protection will not be activated as the markets could not go down any further. Yet, in such
circumstances, the additional value of capital protection is undeniably its merit to encourage the
cautious investors to take exposure to growth assets, though at a substantial protection cost.

Advantages of capital protected fundsb.

Besides the fact that capital protection provides the feeling of safety to investors and
encourages them to take part in falling markets, there are other facts that contribute to the
popularity of the capital protected funds.

Falling interest rates favor the proliferation of capital protected funds: During a crisis, the
monetary authorities have recourse, as a first step, to lowering interest rates as a means to
spur economic recovery. In the wake of the 2008 Global Financial Crisis, the falling interest rates
urged conservative investors to seek higher returns than those offered by term deposits while
limiting their exposure3.

8 Capital Protected Funds Survey

1 http://www.mydigitalfc.com/equity/are-capital-protection-funds-better-fds-647
2 KBC protected funds brochure, page 3
http://kbc-pdf.kbc.be/uploadpdf/bro_capfunds_en.pdf
3 We refer to Annex 2 for a detailed explanation of the Look-back formula.
4 KBC protected funds brochure, page 3
http://kbc-pdf.kbc.be/uploadpdf/bro_capfunds_en.pdf
5 Professional planner magazine, special report: capital and income protected products, page 1
http://www.professionalplanner.com.au/special-reports/the-action-here-is-behind-the-scenes/
6 Chesler, R., (2007), “The Rise and Rise of Capital Protected Products”, Portfolio Construction Conference 2007, Due
Diligence Forum Research Paper, page2
http://www.capitalprotected.com.au/images/stories/whitepaper-on-capital-protected.pdf

Capital protected funds provide a credible portfolio solution in an inflationary environment:
When interest rate is rising, term deposits will grant safety and steady returns for risk-averse
investors. Yet, there is a threat that these investments could be eroded by inflation, especially
in emerging countries where inflation is generally high. Though interest rates could rise to high
levels, they are unlikely to surpass the inflation rate, leading to negative real returns on deposits.
Equity is recommended to alleviate some of the inflation impact. However, given the persistent
volatility in stock markets, capital protected funds offer the possibility to enjoy equity growth
while limiting the exposure to volatility and consequently provide a good investment option in
inflationary times.1

Characteristics of capital protected funds’ returns: Returns gained from capital protected funds
can approximate those of the underlying markets while limiting the downside risks. Some funds
even engage themselves to outperform the stock markets they track. There are also managers
who propose to optimize the performance of a protected fund on the maturity date by acting on
(lowering) the starting value after it is launched2. It is achieved through the “Lookback” formula3,
which ultimately offers attractive buy-in opportunities. In addition to capital protection, a fund
could suggest other features like potential for distributions or a guaranteed minimum rate of
returns.4

Capital protected funds are used to explore emerging markets: While protected funds were
used to look for growth potential in traditional stock markets, they are showing a growing
appetite for emerging markets and commodities. For instance, iron, ore and coal could achieve
long term value in the wake of the industrial revolution occurring in India and China. Though
promising, such investments remain exposed to the downside risks of these new markets.
Thanks to capital protected funds, wary investors secure their capital while taking exposure to
the emerging markets.

Capital protected funds are particularly suitable for retirees and pre-retirees: Those who are
approaching retirement have all the interest to protect the value of their hard-earned savings
from any erosion. Capital protected funds could serve this purpose as long they are perfectly
aligned with the retirees’ investment profile and hence with their portfolio asset allocation.
For example, a protected fund that places the bulk of its investments in fixed income securities
is at the end, similar to a bond fund with useless additional protection costs. This situation
does not serve the interest of retirees who ultimately seek certain gains, when markets allow
it. In the aftermath of the 2008 Global Financial Crisis, many retirees and pre-retirees suffered
large hits to their capital and many had to reduce their lifestyle expectations or work longer
to offset their losses. For an effective protection, individuals need to lock-in the value of their
assets years before the retirement point. Only then they would be considerably immune
against future crises.5

Leveraged capital protected products appeal to young investors: Borrowing to invest in capital
protected products is a practice that has been dominating the Australian market since 20046,
though it is less popular in Europe. Geared capital protection suits those in their 20s or 30s with
good cash flow but few assets. In 2006, the total size of such funds was over $1 billion and this

9Capital Protected Funds Survey

1 Ibid, page 3
2 Ibid, page 4
3 http://www.mydigitalfc.com/equity/are-capital-protection-funds-better-fds-647

escalating trend continued with over $2 billion invested in June 20071. Before offering such a
feature, advisors should assess how the combination of capital protection structure and gearing
could affect the risk/return profile of the client’s underlying investment. The returns perceived
by the investors will be altered by a number of factors including:

The capital protection technique;•
The return of the underlying investment;•
The fees of the structure, both implicit and explicit;•
The cost of lending and,•
The tax-effectiveness of the combined product and lending package.• 2

Tax effectiveness: As mentioned in the previous point, if combined with a lending package,
Australian capital protected products could benefit from tax advantages. In India, for
instance, capital protected funds provide a tax efficient solution. If held for more than a
year, the investor will pay 10% tax without indexation and 20% with indexation, while term
deposits are taxed 30%.3

10 Capital Protected Funds Survey

1 Bernstein, P.L., (1992), “Capital Ideas the Improbable Origins of Modern Wall Street”, The Free Press Editions,
page 270.
2 Principal Protection –A Portfolio Protection Strategy, White Paper, Horizon Investment LLC, page 1
 http://www.horizoninvestments.com/academic-research.php,

Historical backgroundIII.

Capital protected products have evolved over time. They mirror the development of the
instruments available to manufacturers and they adapt to events that marked the market place.
From nothing more exotic than a ‘Bond and Call’ structure with protection only at maturity,
product issuers have emerged from the financial crisis more responsive to clients’ needs and
more flexible regarding the exit and protection options.

The 1987 equity market crash: Portfolio insurance Vs. Capital 1.
protection

Capital protection is different from portfolio insurance. The former came to avoid the
pitfalls of the latter. In the early 1980s, specifically after the stock market crash of 1974, a new
idea was born: “It’s too bad there is no way you could buy insurance on your portfolio”1. In
this context, Hayne Leland, a Berkeley economist, decided that “lifestyles were in danger, and it
was time for invention”. The invention was portfolio insurance, the most controversial portfolio
strategy of the 1980s. It was developed using option pricing theory and the (then newly created)
S&P 500 futures contract. As well documented, portfolio insurance failed to protect investors in
the stock market crash of 1987. Numerous reasons explain its failure:

Portfolio insurance is based on the assumptions that one can trade continuously and •
that there will be a relatively continuous market within which to trade. In other words,
there would be no large price gaps between one trading price and the next.
In portfolio insurance, the asset to be hedged and the hedging instrument were of the •
same nature: stock index futures were used to hedge stocks. When the equity value
decreased, the portfolio insurance algorithm instructs to sell the index options. It lead to
a vicious cycle that exacerbated the October 1987 crisis: the drop in the portfolio value
pushed the portfolio managers to sell more futures which triggered further drops in the
portfolio value, then a massive selling of futures, and so on.
Portfolio insurance needs a very liquid market for the hedging instruments (for instance •
S&P futures). In times of stress, liquidity becomes a hard task and so does the ability to
hedge.

To mitigate the above mentioned risks, capital protection employs a hedging instrument
that is decoupled from the protected asset. The older generation of capital protected products
involved bonds and call options on indices or stocks. Fund managers will invest in bonds so
that the investor’s capital would grow over time and cover the cost of options, and the options
will be used to capture any market growth. The bonds used as a hedging instrument should be
as liquid as possible, for example T-Bills; which are more liquid than stock futures, especially
during a crisis. This decoupled hedge is essential to avoid the positive feedback loop and liquidity
problems posed by portfolio insurance.2 The issue with the bond and call structure is that capital
will be locked until the maturity date, the only date at which capital can be protected.

11Capital Protected Funds Survey

1 http://www.advisorone.com/2002/10/10/principal-protected-funds-cash-from-chaos
2 Lay, R., (2010), “The View from This Side”, Capital Protected Products Odyssey Asset Financial Review, June 2010,
page 18
https://adviser.axa.com.au/idc/groups/public/documents/system/axa_040113.pdf
3 Meaning Bond + Call and CPPI
4 Chaplin, D., (2010), “Lock-Up Options”, Capital Protected Products Odyssey, page 6

In the U.S., capital protected funds languished in obscurity during the internet stock
bubble of the 1990s. However, in the wake of the prolonged recession in equity markets, the
demand for these types of fund climbed. Europe, however, embraced capital protected funds
massively since mid-1990s.1

As interest rates were reduced to low levels, only a small portion of money was left
for the income-generating component, meaning call options, which caused the option-
based strategy to be no longer attractive as before. The Constant Proportion Portfolio
Insurance (CPPI) strategy provides an alternative protection strategy, and is particularly
applicable for open-ended funds.

The second generation of Capital Protected Funds2.

The second version of capital protection is based on a dynamic trading strategy called
Constant Proportion Portfolio Insurance “CPPI”. The CPPI structure also respects the decoupled
hedging principle: the investors’ capital is injected in risky assets to capture any potential growth
and in riskless assets (such as cash or zero coupon bonds) used as hedging instruments. There
are triggers that signal to the manager when to move into cash in stress times. Whereas the Bond
and Call structure is generally used to give investors capital protection on indices or equities,
CPPI is intended to protect a broader type of risky assets, namely open-ended managed funds.
Typically, CPPI is recommended in a strong growth and low volatility market2. Yet, the common
issues of these two capital protection products3 are:

Break costs are imposed on early withdrawals before the maturity date.•
Capital Protection is not enforced unless the investments are locked until the •
maturity date.

The mood has shifted against CPPI after the 2008 Global Financial Crisis, when a number of
protected funds became cash locked. As markets fall, CPPI must sell out equity and move towards
cash and zero coupon bonds. Ultimately, investors found themselves stuck with expensive cash
funds (due to protection costs) that were not due to mature for many years. Furthermore, those
who were not fully aware of the cash-lock repercussions sold out their shares early and assumed
the capital loss. However, the worst scenario was that of investors who took loans to invest in
CPPI protected funds. They could have been left paying interests higher than those perceived
from the cash placements, with nothing to show at the end of the fund term.4

12 Capital Protected Funds Survey

1 http://www.fundsfocus.com.au/managed-funds/pdfs/media/asset-magazine-june2010.pdf
2 Chaplin, D., (2010), Under Lock and Key, Capital Protected Products Odyssey – Asset Financial Review, page 12.
3 Ibid

Change in the landscape of capital protected products after the Global 3.
Financial Crisis

The capital protected investment sector has emerged from the financial crisis alive but
transformed1. The financial ravages hurt a considerable number of investors, but they certainly
served as a harsh lesson for retirees and pre-retirees about the importance of downside risk
protection.

The financial crisis gave a new pulse to the capital protected products industry: The demand for
capital protected funds was at its peak when the crisis hit the hardest. Now, more than four years
after the outbreak of the crisis, some investors are starting to go back to risky products, yet many
are still proceeding with caution. According to a survey conducted by the British Investment
Management Association in 2009, 68% of investors still want to go for capital protected products
which fuel the demand for capital protection2. The British company Structured Retail Products
(SRP), says in its seventh annual conference held in 2010 that (post-crisis) market conditions are
favoring the proliferation of capital protected products. Globally, in 2010, 40% of the sales of the
structured products or more are capital protected, SRP statistics show3. The appetite for capital
protection is building up again, thanks to the innovative protection and the consumer sensitive
features brought about after the Global Financial Crisis.

The industry has learnt some valuable lessons over the financial crisis years: The financial
downturn shed light on the imperfections of the older capital protected products. The “bond and
call” structures needed a long term maturity- 7 years or more- where capital protection is not
effective until that maturity date. Besides, early withdrawals were penalized with redemption
fees. CPPI was also disgraced post-crisis. This was because investors were left locked in expensive
cash investments and, similar to the “bond & call”, they imposed an additional cost on early exits.
These issues encouraged product developers to come up with more flexible, more transparent
and more consumer-centric alternatives.

The third generation of capital protected products: Capital protected funds have evolved post-
crisis. Not only they are responding to the issues posed by the former versions, they are also
proposing creative features.

They address the “cash-lock” constraint by giving investors the benefits of entry and exit 1.
timing flexibility and partial or whole withdrawals without incurring redemption costs.
In fact, from the outside they tend to look similar to the other open-ended unit trusts.
Some funds accept the exit choice even if they have been totally invested in cash due to
falling asset values but they offer to switch into another product that has exposure to
markets. This allows the investors to benefit from the upside.
The new products offer the possibility of turning the protection on and off whenever 2.
the client wants.
As compared with the former versions of capital protected products, maturity lengths 3.
have been shortened considerably. Instead of seven years or more tenure, the third
generation products now propose two to three years investment terms.
The fees inherent in capital protection are more explicit and the payoff profile is becoming 4.
simpler and transparent.
The fierce competition in the capital protected market has put a downward pressure on 5.
prices, which brought down the cost of protection significantly.

13Capital Protected Funds Survey

1 Ibid, Page 10, 11, 12 and 18.
2 Professional planner magazine, special report: capital and income protected products, page 1
http://www.professionalplanner.com.au/special-reports/the-action-here-is-behind-the-scenes/
3 Capital Protected Products Odyssey, June 2010, page18.

Product developers have been innovative in proposing geared and non-geared products, 6.
especially in Australia. The second category implies a number of advantages, namely
gaining a tax benefit by prepaying interest on geared products.

The third generation of capital protected products is based on dynamic hedging and require that
investors pay an explicit fee for the protection, similar to an insurance policy. In return, the provider
has to carry the risk and hedge it out. Though the new products brought revolutionary features
to the capital protection industry, they can actually complement the CPPI structure, depending
on market outlooks. CPPI outperforms in a less volatile and stronger growth environment while
the latter version is suitable for a highly volatile and subdued growth market.1

The suitability of the new capital protected products for retirees and pre-retirees: The financial
crisis proved the value of capital protection for this highly risk-averse market segment. Besides,
retirees and pre-retirees cannot afford to wait for long-term recovery as they need to receive
investment return periodically. Apart from capital preservation, the new products are flexible
about total or partial withdrawal, which is very important during market turbulences. However,
the greater added value is the certainty over investors’ annual income payments and the
neutralization of the longevity risk. Ultimately, the goal of this particular segment is income
preservation, not capital protection per se. They have to maintain a certain lifestyle after the
retirement; hence the fear is to outlive the accumulated savings which is the “longevity risk”.
Income protection could be achieved by locking capital gains before maturity. It can be combined
with look-back options, where the shares of the fund can be redeemed at the highest level
price recorded2. Some issuers have taken the concept even further; they offer retirees protected
income for life. In addition to the dynamic hedging process, they have included an insurance
contract to hedge out longevity risk. The product is an allocated pension that gives rise to
deferred lifetime annuity, which begins when the pension assets are exhausted3.

The discussion above traces evolution of capital protection products in conventional
industry, and explains the factors that triggered each generation of these products. As the core
difference between capital protected funds is protection techniques, we will be building on the
basic structures that actually mirror the three milestones mentioned earlier.

14 Capital Protected Funds Survey

1 Guide to Capital Products, Funds Focus, Issue 2, August 2010, page 3.
2 Ibid.
3 Camilla Rosenkilde (2010) “Capital Protected Funds,” Aarhus School of Business, Aarhus University, p.10.

Protection TechniquesIV.

With the growing number of capital protected funds that are launched in the market,
understanding the difference between the products might seem a hard task. Yet, capital
protection is structured around three basic techniques; the rest is simply derived from them.
These are Bond & Call structure, CPPI and Dynamic Hedging.

11. st generation: Bond and Call option

As explained earlier,
the ‘Bond and Call option’
structure was one of the
first techniques deployed to
provide capital protection.
There are different variations
on the “Call option” element
but the principle remains
unchanged. Essentially, the
capital invested is split into
two parts1:

1. The Bond component: A
safe asset that provides the
protected amount at maturity,
for example term deposits or
fixed interest bonds. In case
of Islamic funds, the safe asset
would be a Murabaha or
Ijarah asset.

2. The call option component:
A call option or an equity based investment like futures that could generate potential returns. In
case of Islamic funds, this could be done through Bai al-Urboun, or Bai bi-Khiyar al-Shart.

A portion of the contribution is invested in the Bond component, while the remaining is
put into call options to provide the returns that the investor would have had if he had invested
in the underlying equities. It is the price of the bonds that dictates the amount left over for the
option which in turn dictates the exposure level to the underlying assets.

Since the cost of the ‘Bonds and Call options’ depends on the market pricing
on the date of issue, it is common to see a range of participation level quoted in the
documentation of the protected funds, rather than a defined participation rate. Usually
for this particular structure, the level of participation in gains of underlying investments
ranges between 100%-150%2. The participation rate is determined by the following formula:3

Participation Rate =
Princpal

− Price of safe asset

       Option price

Bond/Cash
investment

Interest/Bond
yield Call option

Call Option
investment

return

0

20

40

60

80

100

120

140

160

Issue date Maturity date

In
ve

st
m

en
t A

m
ou

nt

Protected
amount

Source: www.fundsfocus.com.au

Figure 1: Bond + Option technique

15Capital Protected Funds Survey

1 Guide to Capital Products, Funds Focus, Issue 2, August 2010, page 3.
2 Camilla Rosenkilde (2010) “Capital Protected Funds,” Aarhus School of Business, Aarhus University, p. 11.
3 Guide to Capital Products, Funds Focus, Issue 2, August 2010, page 4.

Pros & Cons of the Bond & Call technique:

The Bond & Call technique has the advantage of being tested for a long time; it was widely
used after the 1987 equity market crash. The concept is relatively simple. However, investors have
a limited choice in terms of assets they can purchase options on. They are generally restricted
to indices, stocks or sector performance. And they are unable to have exposure to a managed
fund as the performance could be manipulated by the manager for his own benefit (in case he
purchases an option on his own fund).1

Further, the investor is exposed to the counterparty risk associated with the option
seller, and the credit risk of the safe asset component. Should the counterparties fail to meet
their obligations, the capital protection fails, and the investor might not receive back his full
investment.2

22. ndgeneration: Constant Proportion Portfolio Insurance (CPPI)

In simple terms, Constant Proportion Portfolio Insurance (CPPI) is a trading strategy that
dynamically moves the investor in and out of the stock market as it rises or falls. It means that3:

If the market rises, more money is switched into equities.•
If the market drops, more money is switched into cash or safe assets.•

 Risky asset/ equity falls in value:

Increase in Allocation to safe assets

Risky asset/ equity rises in value:

Increase in Allocation torisky asset

Safe assets Risky assets

Source : www.fundsfocus.com.au

Figure 2: Constant Proportion Portfolio Insurance

Technically, the CPPI consists of managing a dynamic portfolio such that its value is always
above a predefined “Protection (or Bond) Floor”, which is the protected value. The percentage
allocated to risky assets (e.g. equities) and to safe assets (e.g. fixed income securities) depends
on the “cushion value” above the floor, defined as (current portfolio value – floor value), and a
“multiplier” coefficient.

The investment in the risky asset = Multiplier x ( current protfolio valie - floor value)

The principle is simple. Part of the capital is invested in risky assets, and the remainder
is placed in safe assets.

16 Capital Protected Funds Survey

http://www.fundsfocus.com.au

1 Funds Focus, Guide to Capital Protected Products, page 6.
2 Capital Protected Products Odyssey, June 2010, page 16.

Multiplier

The value of the multiplier (m) is based on the investor’s risk profile. It is derived from
the maximum one-day loss tolerated on the risky investment. The multiplier is the inverse of that
percentage. So, if one decides that 20% is the maximum “crash” possibility, the multiplier value
will be (1/0.20), or 5.  There are three special cases with regards to the value of multiplier:

If 1. m>1, the strategy is the constant-proportion portfolio insurance strategy (CPPI).
If 2. m=1, floor= value of bills; this strategy becomes the buy-and-hold strategy.
If 0<3. m<1, floor= 0; this is the constant-mix strategy.

Rebalancing

As the portfolio value changes over time, the investor will rebalance according to the
same strategy (the desired multiplier and floor). By managing the fund this way, the product
can have an in-built safety feature to ensure a minimum protected value on the maturity date.
Ideally, the cushion value will grow over time, allowing for more money to flow into the risky
asset.  If, however, the cushion drops, the investor may need to safe assets, like term deposits to
ensure a certain value at the end of the term.

Pros & Cons of the CPPI technique

Compared to the Bond & Call technique, the CPPI offers protection on a wide variety of
assets, like managed funds. The CPPI could be used to lock-in the profits by increasing the value
of the “floor” as the fund increases in value. Some CPPI managers offer a kind of guarantee if they
produce less than the targeted return, although some require a put option fee as insurance.

However, CPPI has an implicit protection cost; it stipulates to sell stocks as they fall
and buy them as they rise in value. Besides, the strategy underperforms in sluggish or volatile
markets. As they move totally into cash; they remain locked-in for the rest of the term and they
won’t be able participate in any market recovery.1

Post-crisis modifications in CPPI

To cope with the “Cash Lockout” feature, some product developers rethought the CPPI
concept and combined it with the investment sequence applied in the Bond & Call structure.
More explicitly, the revised CPPI works as follow:

For example buying a zero coupon bond with maturity in x years and a face value of the 1.
protected amount.
The investors can then add a risky asset, such as equity, to benefit from extra return.2.
Investors can still dynamically trade the portfolio moving from risky assets to safe 3.
placement in event of high volatility or price drops.2

33. rd generation: Dynamic Hedging

Dynamic Hedging protection technique has been introduced as an alternative to the
traditional structures that showed their limitations during the financial crisis. From the investor’s
perspective, the product operates as an insurance premium (for example 2% p.a) whereby the
provider offers capital protection in exchange of an annual percentage fee. The term Dynamic
Hedging relates to how the provider hedges the risks he takes on.

17Capital Protected Funds Survey

1 Funds Focus, Guide to Capital Protected Products, page 9.
2 Ibid, page 10 .
3 Ibid, page 11.

Typically, this technique is considered as an alternative to CPPI in protecting managed
funds. Since it is impossible to buy options on managed funds, the product provider using this
technique proposes the managed funds that correlate to an index. It enables them to purchase
derivatives on that index as a way of hedging the risks, hence the name. As the provider receives
an insurance premium fee, he is the one to be exposed to any deficit.

Pros & Cons of Dynamic Hedging

The reproach made to CPPI is selling equities at prices lower than the ones at which they
are purchased when the market rises. Dynamic Hedging allows investors to participate 100% in
the market recovery since the product issuer will never disinvest. But the investment choice is
limited as compared to the CPPI. The income generating assets should always be correlated to
the performance of indices or shares that can be used for their own hedging.

Though they are relatively expensive, these products have the benefits of explicit
protection costs, higher participation in the upside, the ability to exit at any time without
incurring redemption fees and the flexibility to switch the protection on and off.1

Put options as an additional protection layer4.

Put options relate to Portfolio Insurance rather than Capital Protection. As explained in
the “Historical Background,” it has been associated with the stock market crash of 1987. Besides,
the increasing volatility in recent years has led to higher costs of put option costs.

Yet, some protected fund managers use them as a second protection layer for additional
safety. Alongside many CPPI products, put options enable the manager to cover any potential
shortfall of not being able to sell at the anticipated trigger point.2

Products and protection mechanisms – Which ones to choose?5.

The basic rule for choosing the right protection technique is to look at the type of assets
the product is having exposure to. While the CPPI could be used for any type of assets, Dynamic
Hedging is restricted to the investments that could be linked to the performance of indices/
stocks, while the Bond & Call Structure can only be used with stocks and indices.

To compare the three main protection techniques, the following elements are
noteworthy:3

Bond & Call CPPI Dynamic Hedging

Performance is based on Index
Any asset including managed
funds

Any asset including a managed
fund, but should be linked to an
index/stock performance

Level of participation
in gains of underlying
investment

100% to 150% depending on
bond and call options prices
level

Disinvestment with falls or
volatility in the market: less than
100% participation

100%

18 Capital Protected Funds Survey

1 Ibid.

Cost of protection

Much of the cost is implicit.
Higher participation rates
typically mean this will be higher
than that of CPPI.

Much of the cost is implicit
because of price differential:
Selling low and buying high.
Lower participation rates mean
that the cost is lower than
that of Bond &Call or dynamic
hedging.

Explicit costing can make this
look relatively expensive.
Actually, it should cost
somewhere between CPPI and
Bond & Call.

Ability to turn protection
On/Off

No. It is an in-built protection
that takes effect at maturity.

No. It is an in-built protection
that takes effect at maturity.

Yes

Possibility of early
withdrawals

Implies redemption fees and
foregoing the capital protection

Implies redemption fees and
foregoing the capital protection

Yes, without penalties.

Source: www.fundsfocus.com.au

Table 1: Comparison of the 3 main protection techniques

Capital protection can stem either from portfolio structure (CPPI or Bond & Call), from
an explicit insurance (Dynamic Hedging), or from the combination of the two, at which product
issuers can add put options as an extra safety measure. Sometimes though, the protection could
be achieved through merely a conservative investment strategy: investing in safe fixed-income
securities.

Capital protected funds: Potential PitfallsV.

Clearly there are advantages of capital protected products. They offer the ability to take
exposure to the upside, while protecting the initial capital from any potential downside. Yet, they
are still viewed with some skepticism. Some concerns are highlighted as follows.

Do protected funds have any added value?1.

Capital protected funds’ detractors argue that for an investment of 5-10 year tenure, the
probability of a negative return on the stock market is relatively low. They back their position
with the worst market historical performance.

Since 1970, the share market has never recorded a negative 10-year total return; the
worst 10-year annualized return has been around 5%. For investment tenure of5 years, investors
would have scored some gains except in the early 1970s or, if they were unlucky enough to lock
up their money right before the 1987 stock market crash. In the latter case, the annualized loss
in the 5 years to September 1992 was as small as 0.9%.

Critics further argue that there is no reason to have a recourse to capital protection, even
if the equity market has performed poorly during the years after the Global Financial Crisis. Due
to what economists call “regression to the mean”, the market is expected to bounce back and
produce decent returns in the years to come. The theory stipulates that if the market records
a below average returns for a number of years, it is likely to witness a period of above average
return soon.1

Inflation impact2.

The interest rates proposed by term deposits cannot be high enough to absorb the
inflation effect. Capital protected funds, by taking part of market growth, could hit higher returns

19Capital Protected Funds Survey

http://www.fundsfocus.com.au

1 “Get the facts: Capital guaranteed or protected investments”, Australian Securities and Investments Commission
“ASIC”, October 2010, page 4
https://www.moneysmart.gov.au/media/141812/get-the-facts-capital-guaranteed-or-protected-investments.pdf
2 Ibid, page 3
3 Funds Focus, Guide to Capital Protected Products, page 15
4 “Get the facts: Capital guaranteed or protected investments”, October 2010, page 3

than fixed income rates and probably higher than the inflation rate itself. But some do not exclude
the possibility that inflation could still have an impact on these products in another way.

Capital protected funds promise to return the initial investment or a certain percentage
of it at the end of the term, but most of them do not make any adjustment to reflect changes
in inflation. For instance, if a person invests $100,000 today for 5 years then, assuming that the
inflation rate is of 3% p.a., he or she should get back at least $115,927.41 at the end of the term
to ensure that his capital is indeed protected, even from inflation.1

Benefits and costs of capital protection3.

Generally, capital protected products are more expensive than a simpler investment
because of the extra costs of providing a protection. These depend primarily on three elements:
the type of assets, the fund’s tenure, market volatility and the amount being protected. For
instance,

The cost is greater for an underlying investment with a high proportion of growth assets 1.
than it is for investments with a lower level of growth assets.
It is more expensive to provide protection when market volatility rises than it is when 2.
the volatility lowers.
It is much cheaper to purchase protection against a managed fund for a five-year term 3.
than a volatile midcap stock for a one year term.

Consequently, many recommend weighing the costs against the benefits before getting
into such products. As an example, the protection could be justified for a short term period,
where markets go up and down while it is not regarded as necessary in a long-term tenure as the
risk of decline is much lower.2

Opportunity cost4.

Capital protection may involve an opportunity cost in various scenarios. The first
illustration is that of conservative protected funds where fixed-income securities are likely
to underperform growth investments, especially in a bullish market. Under this scenario, the
investor will miss out on the potential upside in his portfolio.3

Some capital protected funds limit the level of returns you are entitled to if the investment
is flourishing. Say that the fund’s management caps the overall cumulative return at 70%, this in
fact gives less than 8% return p.a. if the tenure is 7 years. Supposing the markets record a higher
growth, the investors locked within such products will find themselves deprived of the extra
returns.4

Another situation is that of a “Cash Lockout” feature found in old generation capital
protected funds, which are still marketed, years after the financial crisis. As pointed out earlier,
these funds are for a set term and if one is willing to withdraw partially or fully, the capital
protection will not be in force. Besides, investors could be exposed to early exit penalties. Finally,
in times of a downturn, investors remain stuck in Bond & Call products or in cash investments
when CPPI is used, watching opportunities just passing by.

20 Capital Protected Funds Survey

1 Ibid, page 4
2 Funds Focus, Guide to Capital Protected Products, page 17

Replacing downside risk with counterparty risk5.

The industry players fixate on cost issues, when the quality of the counterparty providing
the capital protection is equally important. In fact, protected products remove part of the
downside risk and replace it with a counterparty risk.

One should first scrutinize the documentation of the protected fund and try to assess
the counterparty risk by looking at the following elements:

Which company is actually liable for providing the capital protection? Usually, the product 1.
is issued by one company and the underlying protection is provided by another.
If the protection provider has a parent company or is part of a group, are the liabilities 2.
guaranteed by the parent company or another company in the group? Otherwise,
the financial situation of this particular provider should be scrutinized, not the parent
company or the group as a whole.
The investor should emphasize on the stability of the company which actually provides 3.
the protection by duly looking at the legal structure, the credit rating and assessing the
strength of the balance sheet.
Whether there is any event at which the protection would cease to apply (if the protection 4.
provider becomes insolvent)? Are there any circumstances in which one can withdraw
the protection?
Supposing something goes wrong, how does the product issuer expect to meet his 5.
obligation to the investors? Are there assets or any other means that could be used? Are
investors secured or unsecured creditors?1

Apart from the financial stability and the legal structure, there is another metric that
should be considered while estimating the counterparty risk: how do the protection providers
and the product issuers react to market stress. An important lesson of the crisis is the ability
of issuers to change almost all terms and conditions. The reactions to the downturn differed,
some issuers were accommodating to the environment, while others were acting in favor of
their shareholders leaving the investors without any capital protection, which sometimes went
through changes in the investment terms. One should realize that the same scenario could be
replicated in the next crisis. Hence, it is an urgent need to evaluate the global crisis damages and
to establish a list of the issuers who honored their duties towards their investors from those who
did not.2

One capital protected product does not fit all6.

Before deciding whether capital protected products are indeed suitable, investors need
to take some time to identify what is suitable to them. They should first realize that there is a
compromise between investment safety and missing out on market opportunities plus the high
costs associated with capital protection. There is also an element of timing: whether it is the
right time for the client and the right strategy; because having capital protection all the time can
be very expensive.

Only then can the investors undertake the second step and prioritize the product
features that suit them the best. The choice will depend on the client’s objectives, where some
are concerned with maximizing the total returns of their portfolio, others place more importance

21Capital Protected Funds Survey

1 Ibid, page 14

on the security of their investments and the incomes. In the latter case, the cautious investor can
be ready to pay higher fees in order to achieve peace of mind. For instance, retirees who have a
fear of outliving their savings may be willing to forego their returns to ensure that the longevity
risk is transferred to a credible institution. In short, each objective may give shape to a different
capital protected product the features of which are especially tailored to the client.

In section V of chapter IV, we compared the three main protection techniques in light of
their distinctive features. The following is a checklist that provides a wider range of parameters
to be considered when weighing capital protection products that could suit an investor:1

22 Capital Protected Funds Survey

Term of the investment:

The fund’s tenure should
match the client’s
investment timeline. If
redemption (either partial
or total) is not allowed, it
should be considered in case
of unexpected expenses or
liquidity requirements.

Underlying investments:

The underlying investments
provide an indication of the
risk of the portfolio used for
capital protection.

Choice of investments:

If there is a restriction on the
investments choice, there
would be less flexibility in
adapting the portfolio to suit
investors’ objectives and risk
profile.

Potential for capital
growth:

The investor has to identify
whether there is exposure to
financial or real assets that
may provide the potential
for capital growth.

The potential for income
growth is also crucial.
Income returns that are
indexed to inflation or have
the potential to grow at
least at the same pace with
inflation, will allow investors
to secure an income level
that grows overtime to meet
higher living expenses. This
is particularly true in a long-
term investment horizon
where rising living expenses
may eat away the investment
incomes even if they are
protected.

Guaranteed income:

The investor should consider
whether the investment
offer a guaranteed return
on capital. The level of the
guaranteed income paid-
particularly when compared
against defensive assets
(e.g. cash) will determine
the attractiveness of the
investment.

Strength of the guarantee:

Recognize how, by whom
or whether the guarantee
is backed. Some product

providers may set aside
sufficient assets in a
separate fund, for example
a statutory fund, to support
the protection.

Possibility of withdrawal:

This has an impact on
portfolio liquidity especially
if redemptions are not
allowed.

Protection fees:

Capital protection consists
of transferring some of
the investor’s risk to the
protection provider. The
protection provider imposes
a fee for accepting these
risks, or as a compensation
for the costs of hedging out
the risks. The fees should
be carefully assessed to
determine whether the costs
are reasonable.

Opportunity costs:

The investor should
understand and accept to
miss out markets’ upside for
the sake of having capital
protection.

23Capital Protected Funds Survey

1 KBC Protected Funds brochure, page 3.
http://kbc-pdf.kbc.be/uploadpdf/bro_capfunds_en.pdf
2 Byrne, N., (2004), “The European Savings and Investment Outlook-Opportunities in the Wake of Stock Market
Decline, Business Insights, page 79 and 81.
3 Belgium is a leading country as well, but “The European Savings and Investment Outlook” report does not take it in
consideration.
4 The European Savings and Investment Outlook, page 81.

Main findings of the surveyVI.

Europe1.

A leading market for capital protected fundsa.

Capital protected funds have been popular in Europe since the mid-1990s as a result of
successive events that eventually paved the way for their advent. Thanks to the efforts invested
by the European monetary authorities in fighting inflation and reducing public deficit, the
interest rates steadily dropped-off as compared to their levels during the 1980s. Those who were
completely into traditional bonds were looking for new alternatives as their returns were steadily
diminishing. The bullish years of equity markets during the 1990s triggered a vivid interest in
long-term investment in stocks. However, it soon vanished when the downturn hit, especially
after the dot-com bubble burst in the 2000s. Capital protected funds offered a good investment
alternative, especially to investors who were in their beginnings in the financial markets and still
needed to learn the game. These products offered them the opportunity to learn how to keep
track of the markets and exposed them to risks, not only the potential returns, related to equity,
while ensuring a certain level of capital preservation.1

Driven by a conservative investment culture in many countries and due to low interest
rate environments, Europe became a leading market for these products. €146 billion was
invested in 2,321 capital protected funds across Europe as of March 2003. On average, the capital
protected value per fund in Europe is €62.9 million. Approximately, 5% of funds sold in European
markets offer capital protection2. France and Spain hold the majority of funds as the two leading
markets for capital protected funds3. However, some major European countries have relatively
small market for capital protected funds, like UK, Germany and Italy.

France

The largest market for capital protected funds in Europe is France with 831 funds and
an investment size of €48.7bn as of March 2003. While the country has a developed capital
protected funds industry, the total assets proportion of these products is relatively small with
only 5.9%4.

Compared to other European countries, France benefits from a favorable regulatory
environment with regards to Capital protected funds. Nevertheless, fund managers have to
comply with a set of requirements for the sake of protecting investors’ interests. For instance,
they must ensure the customer’s understanding of the product, the formulas should be shown
in mathematical terms and different scenarios should be clearly presented as well as the pros
and cons of the product. A bank has to offer a guarantee on the protected part of the funds and
some regulations further require that the products should be structured at a fair price and that
they must offer a fair value in case of early redemptions.

24 Capital Protected Funds Survey

1 Ibid, page 83.
2 Ibid, page 86.
3 The European Savings and Investment Outlook, page 84

Besides, advantageous tax treatments are available for these funds, which contribute
to their rapid development.1

Notes: Includes capital protected income and equity funds. Percentages indicate share of total European market.
Category “others” includes Belgium, Luxembourg and other European countries.

Source: Data monitor Savings and Investments Database

Figure 3: Number of Capital Protected Funds in Europe, March 2003

Figure 3: Number of Capital Protected Funds by country,
March 2003

France 838
35,8%

Others 838
35.8%

UK 11
0.5%

Germany 46
2%

Spain 602
25.9%

Total equals 2312 funds

Spain

Spain is the second largest market in Europe with €40.6 billion invested and 602 capital
protected funds. Spain has a high portion of total fund assets invested in these particular products
with 21% as of March 2003. The majority of Spanish protected funds are structured outside the
country by major banks such as KBC, BNP Paribas and Goldman Sachs.

Despite the tremendous growth of capital protected funds market in Spain, no specific
regulation has been developed so far.2

Germany

Germany counted 46 protected funds with an investment size of €7,158 million as
of March 2003. Their average fund value is €155.6 million which is one of the largest capital
protected values in Europe. Yet, these funds make up only 0.6% of total funds market in Germany.
Regulation had a great role to play in this situation.

 It should be noted that new amendments have been made to the regulation and these
are expected to boost capital protected funds industry. Moreover, the increasing pension market
will help the sector to expand as a large proportion of the products are sold for retirement
provisions.3

25Capital Protected Funds Survey

1 Ibid, page 86
2 “Capital Protection key to UK advisers, says Skandia survey”, StructuredRetailProducts.com, 20 December 2006.
3 The Total Net Assets of all protected funds listed within this survey have been converted to US dollar based on its
average value of March 2011. For further details please refer to Annex 5.
4 Inflation rates were obtained from the World Development Indicators & Global Development Finance Database,
 www.worldbank.org.
5 We refer to Table 10 (pp.44-45) for further details about the pre-selected funds. Data are for February 29, 2012.

UK

There are a small numbers of capital protected funds in UK and only €713 million is
invested in this asset class as of March 2003. This is principally due to regulatory pressures,
developed equity culture and to some extent the large market for life insurance “with profits”
policies which dominate the market for investment protecting the initial capital.1

However, the situation has considerably changed since then. Four out of five UK financial
advisers see capital protection as one of the building blocks of a sensibly diversified portfolio and
regularly recommend these types of products2.

According to the European Savings and Investment Outlook (2011), German and UK
capital protected funds markets will grow at fairly rapid pace from their current low basis.

Survey’s interpretationb.

The survey’s results seem to be in line with the above mentioned figures. The pre-selection
was not an easy task as we encountered a large number of highly performing funds; this is without
mentioning those with a low rating. Additionally, while browsing across capital protected funds
prospectuses, we noticed that the documents are fairly detailed and that everything is put in
place to make the terms and conditions as understandable as possible: namely the formulas,
subscription and redemption conditions, tax benefits, gains distribution if any and so forth. This
led us to think that the protected funds market should be important, the industry has reached a
certain level of sophistication, and that the regulation has been sufficiently developed to impose
transparency requirements and to look after investors’ interests.

Pertaining to the value of protected funds3, the highest fund size achieved in Europe
Pre-selection is that of “Scottish Widows Capital Protected 10”, a UK fund, with $358.657 million
in terms of net assets. It is the only European fund that has outperformed inflation4. 16 funds
–around half of the funds– have Total Net Assets comprised between $50 million and $10
million. The lowest value was recorded by the Belgium “Fortis B Fix 2008 Lookback 02” fund
with $2.8 million net assets. Although funds of different sizes were found within this sample of
protected funds in Europe, the average fund value is estimated at $61 million, which is relatively
significant.

Number of pre-
selected funds

Total NAV
($ Million)

Average NAV
($ Million)

Median
($ Million)

UK 7 650.46 92.92 29.12

Switzerland 1 14.39 14.39 14.39

France 7 650.76 92.97 23.05

Belgium 7 103.27 14.75 11.15

Luxembourg 7 98.22 14.03 12.78

Germany 1 313.46 313.46 313.46

Table 2: Europe Pre-selected funds’ aggregation (29th February 2012)5

26 Capital Protected Funds Survey

UK Switzerland France Belgium Luxembourg Germany

NAV Average 92.92 14.39 92.97 14.75 14.03 313.46

NAV Median 29.12 23.05 11.15 12.78 313.46

Number of Funds 7 1 7 7 7 1

0.00

50.00

100.00

150.00

200.00

250.00

300.00

U
SD

 M
ill

io
n

NAV Average NAV Median

14.39

350.00

A value of “0” means that the information was not available at the time of data collection.

Figure 4: Europe Pre-selected funds’ aggregation (29th February 2012)

With reference to the final selection (page 46), 5/10 of the surveyed funds are listed
and 8/10 are open-ended. And when the subscription/redemption frequency is available it does
not give away much: subscriptions could surpass redemption and vice versa, depending on the
funds.

The three protection techniques are equally present in this selection: the Bond &Call
Option technique, CPPI and placing the money in high investment grade debt instruments. CPPI
was deployed with different variations:

The traditional version as covered in “Protection Techniques” chapter.•
CPPI with limited downside risk. It uses a dynamic protection floor that locks the value •
of the shares at the highest price achieved.
Conservative CPPI that invests the bulk of the capital in safe debt instruments (the •
threshold of the safe component is relatively high) and at the same time has a dynamic
protection floor.

As protection techniques are globally diversified across Europe, so are the type of assets.
Concerning the valuation method, the NAV is mostly calculated based on forward pricing.

27Capital Protected Funds Survey

1 http://www.morningstar.com/advisor/t/42989856/capital-protection-funds-back-from-the-grave.htm
2 Ibid
3 Lipper and Morningstar, except for Mexico
4 http://latintrade.com/2010/06/banks-buck-the-crisis
5 We refer to Table 13 (pp.77-78) for further details about the pre-selected funds.
Data are of different date: between February 29, 2012 and March 31, 2012.

America2.

This region includes the USA, Canada, Brazil, Chile, and Mexico. Protected funds are
less popular in America as compared to Europe. Up to now, occasional efforts to launch this
kind of funds have been met with only limited success in the USA. According to Morningstar
funds analysis (2011), the concept becomes popular at times when investors seem to fear losses
more than they care about returns1. Recently, they emerged early in the 2000s after the dotcom
bubble burst and it is now a result of the 2008 crisis chaos that they are coming back from the
grave once again2. The reluctance towards capital protected funds could be explained by their
conservatism and limited exposure to the upside in a society known by its equity culture. Besides,
the cost of protection is relatively high and the lack of clarity of a protected fund’s composition
makes it difficult to be used in a portfolio.

USA is not an exception in the area; in general, these funds are not as abundant as in
Europe. Using the same fund screeners as the ones of Europe3, we realize that the number of the
funds’ issuers and that of the protected funds themselves is relatively limited.

No. of Providers No. of Funds*

USA 3 19

Canada 2 7

Brazil 5 13

Chile 1 3

Mexico 4 N/A

  *: N/A: Not Available

Table 3: Number of Capital Protected Funds and Funds’ Providers in America

With respect to the sizes of the funds, the total net assets of Mexican funds are striking.
The largest value in the pre-selection sample is that of “TRIPLE1 GB BBVA Bancomer” with
$306.03 M (March 31, 2012). On average, the size of the preselected Mexican capital protected
fund is the highest in America with $139.30 M. Actually, BBVA Bancomer and Santander Serfin
are the leading banks in Mexico where they are ranked 2nd and 3rd with total assets of $84 B
and $44 B respectively4. Surprisingly, Brazil came right after US capital protected funds with an
average size of $52.29 M against $66.49 M in USA. Canada lags behind with a mean value of
$6.82 M in total net assets, according to the data gathered in the pre-selection.

Number of pre-
selected funds

Total NAV
($ Million)

Average NAV
($ Million)

Median
($ Million)

USA 19 1274.07 84.94 83.20

Canada 9 50.53 5.61 1.94

Brazil 10 361.64 36.16 18.41

Chile 3 77.85 25.95 8.58

Mexico 4 710.52 177.63 173.57

Table 4: America Pre-selected funds aggregation (February 29, 2012: March 31, 2012)5

28 Capital Protected Funds Survey

USA Canada Brazil Chile Mexico

NAV Average 84.94 5.61 36.16 25.95 177.63

NAV Median 83.20 1.94 18.41 8.58 173.57

Number of Funds 19 9 10 3 4

0.00
20.00
40.00
60.00
80.00

100.00
120.00
140.00
160.00
180.00
200.00

U
SD

 M
ill

io
n

NAV Average NAV Median

A value of “0” means that the information was not available at the time of data collection.

Figure 5: America pre-selected funds Aggregation

Globally, the average capital protected fund size in America is estimated at $60.36 M. It
largely benefits from the performance of the banks that stand behind Latin American funds. The
mean value of the North American funds (USA and Canada) does not exceed $44.78 M while
that of Latin America (Brazil, Mexico and Chile) is of $65.05 M. Notably, the global financial
institutions that manage most of the preselected Latin American protected funds are looking at
their operations in this specific region for growth prospect. As a matter of fact, financial activities
in Latin America emerged largely intact from the global crisis thanks to the resilience of the
banking system known for conservative balance sheets and solid reserves.

All three protection techniques were utilized in the region, with some variations. For
CPPI, there is the traditional version of it, conservative CPPI with a large portfolio portion
invested in debt instruments and CPPI with dynamic protection floor to lock the share value at
the highest price achieved. The Bond &Call Option also exists in its traditional form, but in one
occasion it was combined with dynamic asset allocation where the fund can limit its exposure to
derivatives and modify its portfolio composition if market conditions are not favorable. Hence,
Bond &Call Option can offer the same flexibility as that of CPPI. The protection mechanisms
are usually combined with a protection sub-layer that is either “a protection agreement” with
a renowned bank or an insurance company, especially in US funds, or derivative instruments
used for hedging purposes.

29Capital Protected Funds Survey

1 Byrne, N., (2004), “The European Savings and Investment Outlook-Opportunities in the wake of stock market
decline”, Business Insights, page 81 http://vnn1.online.fr/Cafeteria/Financial_Accounting_Banking/Reuters.Business.
Insights.The.European.Savings.and.Investments.Market.Outlook.Mar.2004.eBook-TLFeBOOK.pdf
2 http://www.mondaq.com/article.asp?articleid=42568
3 The Monetary Authority of Singapore, Survey of asset management industry, 31st December 2002, page 6
http://www.mas.gov.sg/~/media/resource/eco_research/surveys/2002AMSurveyV2.pdf
4 Singapore Foreign Exchange Market Committee, 2007/2008 Biennial Publication, page 36
http://www.sfemc.org/annual_report/SFEMCFA052_.pdf

Asia3.

An outlook on Asian Capital Protected Funds marketa.

Europe and Asia are the largest markets for capital protected funds. In Asia, especially,
there is a large market for structured and hedge fund products, including capital protected funds.
In most cases, less regimented regulation allows to market all forms of structured and capital
protected products1. In the following paragraphs, we elaborate more on pertinent countries
either in terms of their regulatory regime or the market size of capital protected funds.

India

India, a very stringent regulatory position is adopted on this kind of products. Initially,
the Security Exchange Board of India (SEBI) banned all forms of protected returns and capital
schemes. In August 2006, SEBI ceded to the lobbying pressure of the Association of Mutual
Funds in India and amended its mutual funds regulation enacted in 1996 by opening the market
for what it called “Capital Protection Oriented Schemes”.2 Accordingly 23 funds were launched in
2011.Yet, the country remains firm on its regulation and subjects these products to a set of rules,
as is confirmed by our survey’s results:

The funds have to be closed-end, investors would not have any exit option before •
maturity and fund managers would not be entitled to repurchase units.
The protection of capital arises from the portfolio structure of the scheme and not from •
any bank guarantee or insurance cover. The capital preservation is achieved by investing
the majority of the portfolio in highly rated debt instruments.
The asset management company offering such products assures the investor on the •
capital, not on the returns.
Capital protected units have to be rated by a registered credit rating agency for evaluating •
the degree of certainty of attaining the objective related to principal protection.

Singapore

According to the 2002 Asset Management Survey conducted by the Monetary Authority
of Singapore “MAS”, capital guaranteed/protected funds and balance funds were one of the
most popular investment choices. Notably, the number of capital guaranteed/protected funds
increased significantly from 39 funds to 82 funds, tripling its total assets under management
(AUM) from SGD 1.8 billion (equivalent to 17% of Collective Investment Schemes “CIS” total
assets) to SGD 5.4 billion (38% of CIS total assets) for the year ended 2001 and 2002 respectively3.
While the capital protected funds were flourishing in the years just prior the financial crisis, they
contracted afterwards. As illustrated in the 2007 Asset Management Survey, the allocation to
capital guaranteed / protected funds CIS declined by more than 40%4.

30 Capital Protected Funds Survey

1 http://www.asiaone.com/Business/News/My%2BMoney/Story/A1Story20090909-166674.html
2 Capital Protected Products Odyssey, June 2010, Page 12 and 13.
3 Portfolio Construction Conference 2007, Due Diligence Forum Research Paper, page2
http://www.capitalprotected.com.au/whitepaper-on-capital-protected
4 The Australian Securities and Investments Commission, Review of disclosure for capital protected products and
retail structured or derivative products, July 2010. http://www.asic.gov.au/asic/pdflib.nsf/LookupByFileName/
REP201-PDS-reviews-2010-7-14.pdf/$file/REP201-PDS-reviews-2010-7-14.pdf

Another turning point in this industry, was the decision of the financial regulator (the
MAS) to ban the “capital/principal protected” term since too many investors got confused
about its real meaning. This was part of the MAS response to the collapse of the Lehman-linked
structured products and the controversy over the way complex financial instruments were sold
to lowly educated and old people. Consequently, the regulator decided to keep the “capital
guaranteed” label, meaning the investors’ principal is fully protected, which is one of only two
types of products allowed to be sold. The other category is everything else that is not capital
guaranteed. Besides, some of the key changes consist of requiring financial institutions to provide
clients with simple, user friendly product documentation and displaying “health warning” on
complex investments in an appropriately large font. The change will make it tougher for product
providers to market these investments. However, the competitiveness of Singapore as a wealth
management centre would likely be not affected since the measures as a whole will safeguard
investors’ interests and provide a higher level of disclosure and confidence.1

Australia

While the capital protected funds market is relatively new in the Australia, the statistics
provided by the Reserve Bank of Australia show that it grew to more than $2 billion as of
December 31, 2009. Actually, the appetite for these products is building up again in Australia
as issuers are coming back with a wider diversity of assets and using innovative protection and
packaging mechanisms. This burgeoning demand coincides with diminishing market volatility
and rising interest rates; both brought the capital protection costs down. Though Australian
equities still dominate the market, investors are showing a growing interest in capital protected
Asian equity products, particularly those venturing in China2.

To date, the Australian market has been dominated by protected lending products,
where retail investors borrow to invest in a capital protected fund, an approach barely seen in
Europe. Investments into geared capital protected funds in Australia surpassed $1 billion during
2006 and continued their escalating trend in the first half of 2007 to hit over $2 billion in June
2007. The expansion and the difference in usage of capital protected funds compared to Europe
could be due to the following factors:

Australian lenders proposing up to 100% loan-to-value ratios against capital •
protected products which appeal to the wealth accumulating investors with
relatively low asset base.
High marginal tax rates that makes gearing an effective strategy for high income •
earners.
Strong Australian equity market performance which makes gearing a more •
attractive option.3

The Australian Securities and Investments Commission (ASIC) also adheres to protecting
the interests of the investors and require a certain degree of transparency in the offering
documents of protected funds. In a report issued in July 2010, the ASIC emphasized on user-
friendly tools to explain complex products as it stressed on the disclosure of key risks, financial
information of counterparties, break costs, segregation and use of clients’ money by issuers4.

31Capital Protected Funds Survey

1 http://www.fimm.com.my/pdf/Q&A_on_capital.pdf

Capital protected funds in New Zealand follow almost the same trend as Australia, since
the majority of capital protected funds is offered by Australian mother companies.

Malaysia

As of end-of-August 2008, the Federation of Investment Managers Malaysia (FIMM)
estimated the number of capital and guaranteed trust funds in the country to be 45. Their
assets under management (AUM) were worth about RM 8.1 billion which represents
approximately 13% of the total AUM of all private units trust in Malaysia.

Capital protected funds in Malaysia promise to repay 100% of the initial capital and their
maturity varies from 18 months up to 5 years. In most cases, the model followed is Bond &
Call Option where a large portion of the capital raised is invested in Zero Coupon Negotiable
Instruments Deposits (ZNIDs), which are money market instruments. ZNIDs protect the capital as
they are issued at a discount and compound at a fixed interest rate to their par value (of 100%)
at maturity.

To ensure a certain level of resilience and build investors’ confidence, the capital
protected/ guaranteed funds industry is regulated by the Securities Commission (SC). For instance,
the SC guidelines require ZNIDs held to be of high grade, meaning that they are issued by local
banks with a minimum rating of A from approved rating agencies. The fund manager should
also diversify the risks using a portfolio of ZNIDs issued by four or five different banks. Besides,
capital protected funds benefitted from an announcement made by Bank Negara Malaysia
(BNM) on 17th October 2008. It stipulated that all Ringgit and Foreign currency deposits placed
with financial institutions will be fully guaranteed by the government and this includes the ZNIDs
which are ultimately a form of deposits. To limit the contagion effect in future crises—as the one
suffered by Hong Kong and Singapore in the aftermath of the Lehman Brother collapse—and to
protect the investors from any capital losses, the SC limited investments in options/derivatives
with foreign counterparties to not more than 15% of the fund’s NAV.1

Survey’s interpretationb.

It is hard to set a clear picture on the value of capital protected funds in Asia. As a matter
of fact, this information was not found for about half of the funds (29 out of 62) collected in the
pre-selection sample. Hence, it becomes difficult to estimate, with a certain level of accuracy,
the average fund size in the region. Besides, it is also hard to establish a cross comparison on the
level of funds’ size per country. Generally speaking, the mean value as given by the pre-selection
is of $44.57 million but if the fund with highest total net assets (worth $876 million) is excluded,
that of the Malaysian fund “PNB Structured Investment”, the mean value will drop to $17.75
million. Roughly, we can say that the Asian protected funds on average are small as compared to
the average size of Europe and North America. The size of 28 funds (out of the 32 whose Total
Net Assets value is available) is under $40 million.

Number of pre-
selected funds

Total NAV($ Million) Average NAV($
Million)

Median($ Million)

New Zealand 6 11 5.50 5.50

Australia 10 72.33 18.08 18.78

Japan 4 112.73 37.58 26.89

Korea 2 1.21 1.21 1.21

Singapore 4 49.31 12.33 12.84

Malaysia 9 952.15 119.02 13.10

32 Capital Protected Funds Survey

1 We refer to Table 16 (pp.108-109) for further details about the pre-selected funds.
For the funds that have been screened using www.lipperleaders.com, the data relative to “Total net assets” is that of
30th March 2012.

Pakistan 8 78.56 15.71 11.80

India 12 148.94 29.79 35.28

Cina 6 -- -- --

Table 5: Asia Pre-selected funds aggregation (February 29, 2012: March 31, 2012)1

New
Zealand Australia Japan Korea Singapore Malaysia Pakistan India China

NAV Average 5.50 18.08 37.58 1.21 12.33 119.02 15.71 29.79 0.00

NAV Median 5.50 18.79 26.89 1.21 12.84 13.10 11.80 35.28 0.00

Number of Funds 6 10 4 2 4 9 8 12 6

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

U
SD

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ill

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NAV Average NAV Median

A value of “0” means that the information was not available at the time of data collection.

Figure 6: Asia pre-selected funds aggregation (February 29, 2012: March 31, 2012)

A striking remark is the relatively young age of the funds of the final selection (page 111)
and that they are actually the best performing funds we could find: 13 out of 17 funds in the
final selection have been established post 2007. The capital protected products industry is new
in Asia-Pacific as compared to Europe but is currently witnessing a notable expansion.

In general, the numbers of closed and open-ended funds are equally important: 10
against 6 respectively. So are the numbers of listed and unlisted funds: 7 against 10 respectively.
It does not reveal any outstanding features in the region; however, certain countries have
specific characteristics as we have seen in the previous sub-section “An Outlook On Asian Capital
Protected Funds Market” and it will be confirmed later.

With regards to capital protection approaches, there are five main techniques, with
various versions:

CPPI

CPPI in its traditional version. •
In Europe and America, a conservative version of CPPI is adopted; in Asia, CPPI with a •
high equity exposure is applied where a minimum equity portion is imposed.

Bond & Call Option

Bond & Call Option in its traditional version.•
Bond &Call option combined with dynamic investment in the underlying assets of the •
provided option strategy (there are several types) in order to optimize the returns.

33Capital Protected Funds Survey

Bond & Call option combined with dynamic allocation between options and safe assets •
(debt securities) depending on market conditions. This strategy resembles the CPPI to
some extent.

Investing in Safe assets

Safe assets are often in the form of liquid money market or debt instruments with good •
credit rating.
One variation is to focus on debt instruments with limited equity exposure. However, •
unlike conservative CPPI, the investment strategy is rather passive and the hedging
approach is static. Rebalancing could be done but only in the event of extreme need.
Another version is safe assets combined with an interest rate swap. The interest •
generated from the debt securities is swapped with fixed payouts provided by a given
financial institution.
Or investing in safe assets combined with a total return swap. In such a case, total returns •
of debt notes are swapped with a fixed payout.

Capital protection agreement

Usually, the capital protection agreement is used as an additional protection layer. It is •
an insurance provided by a third party to the fund through which the latter is liable to
repay the initial investment amount in the event of loss.
It was also present as a standalone protection technique whereby the fund deals with •
an asset provider who is liable for paying returns and ensuring capital protection to the
fund.

Protection embedded in the structure of the fund’s assets

The fund could invest in structured products protected by means of the Bond &Call •
Option or REITS (Real Estate Investment Trust) securities with a buy-back option that
locks the initial price.
A case was found where the CPPI and a protection agreement are indirectly present in a •
sub fund in which the concerned capital protected fund invests.

Each of these protection approaches could be combined with an additional protection layer of
either derivatives for hedging purposes or a third party protection agreement.

34 Capital Protected Funds Survey

1 Macko, W., and Sourrouille, D., (2010), “Investment Funds in MENA”, the World Bank.
2 According to the World Bank report (Investment Funds in MENA), investment funds hold nearly 30% of market
capitalization in the US and 60% in Australia; about 39% in France; 10 – 15% in Japan, UK, Canada, and Germany;
and about 8% in Brazil, page 9.

MENA4.

The investment funds industry in the MENA region is in its embryonic stage as compared
to other regions and this does not exclude capital protected funds sector. Following is a brief
outlook on investment funds in MENA.

MENA investment funds landscapea.

Large savings and economic prosperity have not yet resulted into a large and diversified
institutional investment environment in the MENA region; especially in the GCC where investor
profiles remain distinct from the rest of the world. Actually, the investors’ landscape is dominated
by sovereign wealth funds, public pension funds and family businesses while Collective Investment
Schemes (CIS) hold a minority of assets under management. At the end of 2009, MENA accounted
for 765 privately-managed investment funds with $63 billion of total assets under management
(AUM), including 308 funds with $29 billion AUM domiciled in the GCC.1

Equity funds are the most dominant type in terms of number (48.16% of MENA mutual
funds). Yet, the portion of listed equity held by privately-managed mutual funds does not
exceed 2%, which is miniscule compared to other countries2. The funds investing in short-term
instruments – money market or trade finance funds – have the largest assets under management
(nearly 50% of MENA funds size). The bulk of it is concentrated in Egypt, Morocco and Saudi
Arabia. Fixed income funds are small everywhere in the MENA, except Morocco, reflecting the
under-development of debt markets in the region. Capital guaranteed/protected funds activity
is very trivial - only 1.44% of CIS funds.

MENA’s investment funds industry remains insignificant by international comparison: the
ratio of mutual fund assets to GDP is also well below the levels predicted by market capitalization,
which highlights the thin institutional investor base in the region. Hence, as a consequence of
small holdings (compared to GDP) and a relatively large number of mutual funds in MENA,
average fund sizes are found to be small.

MENA governments may need to put in more efforts to promote mutual funds
development. The top priorities would be:

Raising investors’ protection to IOSCO (International Organization of Securities •
Commissions) standards to cope with their reluctance to invest in investment funds.
Broadening the asset classes and developing government securities and private •
instruments with varying risk-profiles to suite diverse investor’ preferences.
Further improvement of capital market governance to enhance capital flows as well as •
encouraging the expansion of non-bank securities firms.

Survey’s interpretationb.

Knowing the MENA investment funds landscape, it is easy to understand the number of
obstacles we faced during the survey. The mutual funds industry is in a nascent stage and so is
the capital protected funds sector, if not worse. This explains the lack of consistent databases and

35Capital Protected Funds Survey

1 We refer to Table 19 (pp.158-159) for further details about the pre-selected funds.

documentation regarding protected funds. Besides, most of the funds’ prospectuses or factsheets
are not well elaborated, which reaffirms the need for investor’s protection mechanism.

The outcome is an incomplete picture of MENA capital protected funds. A number of
funds were not considered due to the unavailability of documentation. Even for those short-listed,
data was missing most of the time, for instance total net assets and subscription/redemption
frequency.

Number of pre-
selected funds

Total NAV ($ Million) Average NAV ($
Million)

Median ($ Million)

Bahrain 2 155.37 155.37 155.37

Qatar 1 N/A N/A N/A

Kuwait 5 N/A N/A N/A

Cayman 1 N/A N/A N/A

UAE 2 N/A N/A N/A

Egypt 8 42.24 21.12 21.13

Tunisia 3 10.68 5.34 5.34

Table 6: MENA Pre-selected funds aggregation (March 2008: March 2012)1

Bahrain Qatar Kuwait Cayman UAE Egypt Tunisia

NAV Average 155.37 0.00 0.00 0.00 0.00 21.13 5.34

NAV Median 155.37 0.00 0.00 0.00 0.00 21.13 5.34

Number of Funds 2 1 5 1 2 8 3

0.00

20.00

40.00

60.00

80.00

100.00

120.00

140.00

160.00

180.00

U
SD

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NAV Average NAV Median

A value of “0” means that the information was not available at the time of data collection.

Figure 7: MENA pre-selected funds aggregation (March 2008: March 2012)

Apart from that, all the funds of the final selection are open-ended (6/6) and most of
them are either not listed in a secondary market or there is no certitude about their listing. The
funds deploy the very basic protection technique—investing in safe assets—or the traditional
CPPI combined with derivatives for hedging purposes. The Bond and Call Option mechanism was
not detected at all. It appears from these observations that capital protected funds market in
MENA have not yet reached the level of maturity and sophistication of the other regions.

36 Capital Protected Funds Survey

1 The HNWI definition include any individuals whose financial assets are equal at least USD 1 million.
2 Analyzing Alternative Funds, an article published by Islamic Finance Asia in October 2010
http://www.islamicfinanceasia.com/article.asp?nm_id=18654
3 http://www.reuters.com/article/2012/06/14/islamic-finance-structures-idUSL5E8H46J120120614
4 For further information, we refer to
http://www.financialplaces.com/f_article.php?id=8
5 For a detailed study of the Islamic financial derivative products, we refer to:
Sole, J., and Jobst, A., (2012), Operative Principles of Islamic Derivatives – Towards a Coherent Theory, IMF Working
Papers, 12/63.
Al-Suwailim, S.I., (2008), Hedging in Islamic Finance, IRTI Occasional Paper No.10, 150 pages.
6 For further information, we refer to: http://www.financialplaces.com/f_article.php?id=8
7 “Venturing Into New Territories: Innovative Islamic Funds’ Structures,” FinancialPlaces.com.
http://www.financialplaces.com/f_article.php?id=8

Assets are either mixed due to the use of CPPI or in form of bonds. Valuation always rests
on forward pricing.

Islamic Capital Protected Funds5.

An outlook on Islamic Capital Protected funds industrya.

The concept of capital protection was embraced by Islamic investors in a rush for safety
after the wild behavior of Islamic stock markets, especially in the GCC region. The idea was
further entrenched as Islamic funds wanted to diversify away from the mainstream assets: equity
and Sukuk. Currently, HNWI (High-Net-Worth Individuals)1 are trying to explore new investment
areas like commodities, ships and real estate. Yet, the traditional asset classes are still dominant.
Out of a total of 433 Islamic Funds tracked by Morningstar for the year 2010, 172 were equity
funds, 41 balanced funds, 32 fixed income funds, 21 money market funds while only 7 were
capital protected, 2 hedge funds and the remaining funds were unclassified2. Despite their small
market share, Islamic capital protected funds are expected to expand3. Safe placement gained
popularity and the investors’ community is becoming cautious about where they are putting
their money particularly after the global financial crisis.

Structures

It appears that most Islamic fund promoters tend to mirror the structures of conventional
finance, and Islamic capital protected funds are not an exception. This is true with respect to
both the form of the products as well as the investment objectives declared by the funds; though
the eligible asset classes differ for Shari’ah compliance considerations.

Conventional products use high credit rating debt instruments and zero-coupon bonds to
provide protection; this is not admissible in Islamic finance. The use of options either in the Bond
&Call Option model or simply for hedging purposes is also problematic. Instead, most Shari’ah
compliant protected funds employ two investment mechanisms to preserve the principal;
Murabaha and Bai’ Al-Urboon.

Murabaha transactions, perceived as a relatively low risk investment, are structured to
provide the required capital protection. The bulk of the money raised from investors by the
capital protected fund is placed in a fixed term commodity trade transaction or a series of such
transactions in order to generate fixed returns4. Capital protection could be based solely on
Murabaha instruments or they could be part of an Islamic version of the “Bond & Call” model.

For the second case, the outcome of a call option is reproduced by means of Bai’ Al-
Urboon transaction. A small percentage of the initial capital is used to purchase “Islamic options”5

over a basket of Shari’ah compliant commodities or shares6. While Bai’ Al-Urboon is intended to
take exposure over these markets; the profits generated by the Murabaha transactions are used
to compensate for the lost option payment, hence protecting the capital7.

37Capital Protected Funds Survey

1 Ibid
2 Bloomberg: www.bloomberg.com/quote/ALSDTEA:AB.
3 Mako, W., and Sourrouille, D., (2010), “Investment Funds in MENA”, The World Bank, page 9
4 Deutsche Bank was the capital protection provider.
5 http://www.chriswrightmedia.com/cerullishariahcapitalprotectionjan09/
6 Ibid

A historical insight

The inception

The development of an Islamic alternative to call options was initiated by the
National Commercial Bank—a leading commercial bank in Saudi Arabia—in the late
1990s, following the success of their conventional capital guaranteed products. In
collaboration with Deutsche Bank, NCB succeeded in its offering of the first Islamic
capital protected fund to retail investors. Evidence of their success was the high level of
subscriptions for the first series (over $275 million)—which encouraged NCB to issue the
second series—and to package the product for other financial institutions in the Middle
East using private label arrangements1.

In 2005, NCB launched the first capital protected fund based on CPPI in Saudi
Arabia. The fund is open-ended and invests in listed companies in the Saudi market while
reducing the downside risks through dynamic asset allocation between the risky equities
and low risky investments.2

The Expansion

In the GCC

The golden age of the Islamic capital protected funds is attributed to the huge crashes
in the Gulf stock markets during 2006 and the subsequent period. The trend was supported
by the greatest penetration of Shari’ah compliant funds in the Gulf where Islamic instruments
account for about 64.3% of AUM. There is a palpable variation among the GCC members:
Islamic investments account for 80% of the Saudi mutual fund AUM, whereas they are narrow
(only 15 to 25%) in the other GCC countries3. Consequently, Saudi Arabia offered a convenient
environment for the development of Shari’ah compliant capital protected funds, especially when
the country witnessed the collapse of its stock market in 2006. Local banks quickly joined the
wave. Bahrain’s Khaleej Finance and Investment launched a capital protected fund in October
2006 named Optimum, that was linked to Islamic equity, crude oil and copper4. In March 2007,
Dubai Islamic Bank issued a series of capital protected global real estate investment trust (REIT)
notes. One month later, ABN Amro launched an Islamic capital protected note in the Gulf linked
to a basket of commodities5.

Outside the GCC

Islamic capital protected funds have grown in popularity outside the Middle East as well.
Some Malaysian fund management companies have taken the lead to promote these products
like CIMB or ING with its Baraka capital protected notes to name a few. In Pakistan, Al Meezan
investment Management was the first to launch a Shari’ah compliant protected fund in February
2008. They placed up to 80% of the investors contributions into a Murabaha structure with
Meezan Bank and the balance in Shari’ah compliant equities6.

38 Capital Protected Funds Survey

1 http://www.chriswrightmedia.com/cerullishariahcapitalprotectionjan09/2/

Issues and Challenges

Though the 2008 downturn created an environment in which capital protected funds
usually flourish, Islamic counterparts proved to be thin on the ground because of the following
reasons:

The word “Structuring” has been closely linked to the recent financial scandals and •
some of this negative reputation has reached Islamic countries as well. Though many
local institutions offer Shari’ah compliant capital protected products, it is very often an
international group that is behind it: Deutsche, JP Morgan, UBS, BNP Paribas, SG or
ABN Amro for example. And some of these groups’ structures have caused great socio-
economic damage in the world lately.
Islamic protected funds have to overcome the same issue as that of other Islamic mutual •
funds i.e. the limited availability of Shari’ah compliant assets.
Still with regards to the underlying assets, some funds may have recourse to controversial •
structures. One of the most contested Islamic products was structured by Deutsche Bank
and issued by Dubai Islamic Bank in 2007. It was referenced to the DB-GSAM Alps Index
that tracks the performance of a fund of hedge funds managed by Goldman Sachs Asset
Management. Although this structure was validated by some renowned scholars by
way of a swap mechanism to put returns into a compliant asset, there was widespread
concern regarding the Shari’ah compliance of this method.1

Survey’s interpretationb.

From the preliminary research, we notice that Saudi Arabia has an outstanding
Islamic capital protected funds’ base, while Malaysia and Pakistan come in second in terms of
importance. On the other hand, we were surprised by the limited number of these funds in some
gulf countries like Bahrain, UAE, Kuwait and Qatar.

The largest funds are located within Saudi Arabia. The highest total net asset in the
survey’s pre-selection is attributed to “Commodity Trading Fund SAR” with a value of $533.87
million. In KSA, five of the selected funds are above $70 million and these are found to be within
the hands of large investment families in the MENA region. The average fund size, however, is
estimated at $46.99 million. Actually, in addition to large capital protected funds, the Saudi Stock
Exchange also comprises a considerable number of small funds: half of the Saudi pre-selection
(12 out of 24 funds) is under $20 million.

Fund’s name Total Net Assets ($ M) Investment Company

Commodity Trading Fund SAR 533.87 Riyad Capital

Al-Badr Murabaha Fund – SAR 210.19 Saudi Fransi Capital

AlManarah Conservative Growth Fund 136 NCB Capital

International Trade Finance Fund ( Sunbullah USD) 121 Samba Capital

HSBC Amanah Multi-Assets Defensive Portfolio 74.40 HSBC Saudi Arabia Ltd

Table 7: Largest Capital Protected funds within the survey’s pre-selection

39Capital Protected Funds Survey

1 Mako, W., and Sourrouille, D., (2010), “Investment Funds in MENA”, The World Bank, page 12
2 We refer to Table 22 (pp.177-178) for further details about the pre-selected funds.
Data are those of March 2012, except for UAE where the data are those of February 2012.

Investment fund Families Number of Funds Total Net Assets ($ M)

NCB Capital 13 9.56

EFG Hermes 20 2.53

Riyad Capital 13 2.47

Beltone Asset Management 9 2.47

HSBC Saudi Arabia Ltd 16 2.38

Al-Rajhi Capital 12 1.94

El-Ahly Fund management 5 1.57

CI Asset Management 4 1.38

Samba Capital 5 1.28

Caam Saudi Fransi 8 1.26

Subtotal 105 26.84

Percentage from mutual fund industry in MENA 27% 70%

Others 278 11.55

Percentage from mutual fund industry in MENA 73% 30%

Total 383 38.39

Table 8: Largest MENA Investment Fund Families (source: World Bank, 2009)1

Interestingly, about 30% of funds hold 70% of Total net assets while 70% of funds hold
only 30% of Total net assets. This reflects the disparity of wealth between MENA countries.

Malaysia comes in second where 3 out of 4 funds’ net assets are above $40 million and
the mean value is estimated at $35 million. Most of the Pakistani funds are under $10 million and
the average fund size is relatively small at $6.61 million. The data related to total net assets is
unavailable for UAE and Kuwait, except for one Kuwaiti fund “Global Islamic Fund” whose size is
very trivial at only $1.80 million. Overall, the average Islamic capital protected funds value is still
low as compared with its conventional peers in other regions, at around $47 million.

Number of pre-
selected funds

Total NAV ($ Million) Average NAV ($
Million)

Median ($ Million)

UAE 11 -- -- --

Kuwait 14 1.80 1.80 1.80

Pakistan 5 31.20 6.24 4.92

Malaysia 5 176.21 44.05 49.54

KSA 24 1341.65 58.33 16.52

Table 9: Islamic Pre-selected funds aggregation (February: March 2012)2

40 Capital Protected Funds Survey

UAE Kuwait Pakistan Malaysia KSA

NAV Average 0.00 1.80 6.24 44.05 58.33

NAV Median 0.00 1.80 4.92 49.54 16.52

Number of Funds 11 14 5 5 24

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

U
SD

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ill

io
n

NAV Average NAV Median

A value of “0” means that the information was not available at the time of data collection.

Figure 8: Islamic pre-selected capital protected funds aggregation (February: March 2012)

At first sight, one realize that the funds listed in the final selection (page 179) are not
that recent. Only 8/14 have been established post-2007. In reality, a fund’s age depends on the
countries; for instance protected funds in Malaysia and Pakistan are relatively new as the oldest
ones were established in 2007.

Out of 14 final selected funds, 10 are open-ended while only 4 are closed and 9 are listed
while 5 are not.

Capital protection techniques are constrained with the limited availability of Shari’ah
compliant assets, especially those with limited risk and high credit quality that could be used to
preserve the capital. Besides, the continuous debate regarding the Shari’ah compliance of some
“Islamic derivatives” has created some sort of reluctance amongst fund managers to incorporate
them within protection strategies.

Although we previously mentioned the Islamic version of a call option via Bai’ Al-Urboon
and its adoption by NCB in its first Islamic protected fund, the Islamic “Bond & Call” strategy
was not found in this survey. At least, no clear mention has been made about it in any of the
prospectuses. In contrast, the survey revealed a wide use of fixed income contracts like Sukuk and
Murabaha transactions that could be applied in different investment approaches. Only one fund
in the final selection had recourse to structured products and another one to Ijarah transactions.
Protection strategies can be summarized as follows:

Investing 100% of the capital in safe assets: • this was detected in two funds. The “Global
Islamic Fund” of Kuwait invested in governmental and semi-governmental securities
that were based on Murabaha and Wakalah. The “HBL Islamic Money Market Fund” of
Pakistan invested in high credit graded bank deposits and money market instruments.
Cautious investment in mixed assets while adopting a static investment approach: •
This approach was adopted by five funds. It consists of placing a considerable and fixed
portion of the initial capital in low risk and high credit quality instruments including
Sukuk or Murabaha transactions either directly or through funds. The remaining is used
to take limited exposure over Shari’ah compliant equity.

41Capital Protected Funds Survey

1 Mako, W., and Sourrouille, D., (2010), “Investment Funds in MENA”, The World Bank, page 7

Cautious investment in mixed assets with dynamic allocation:•  This method was found
within two Saudi funds. It is about following an active management strategy of allocating
the capital at different and dynamic weighting across conservative instruments like
Murabaha transactions or Sukuk and return generating instruments like equity. As
protected funds are defensive, the bulk of investor contributions are directed to safe
instruments while a small percentage is injected into equities to benefit from the
upside.
Trade financing:•  Three funds used this method and all of them are located in Saudi
Arabia. It is done by way of Murabaha transactions where goods are purchased on Spot
Basis, then sold at markup price provided that the payment is made in installments.
Usually, a small portion of the capital is invested in safe fixed income instruments.
Ijarah transactions:•  The only funds that use Ijarah transactions (not Ijarah Sukuk) are
the NBK series, namely NBK-Islamic Ijarah fund VIII. Ijarah allows the fund to generate
returns from the equipment’s sublease and to protect the initial capital. To achieve this
goal, the NBK fund sale-and-lease-back. It places investors’ contributions in a Cayman
Island based fund “Wafra Fund”, which in turn deals with a SVP of a lease originator-
responsible for supervising lease transactions. By purchasing the equipments from the
SPV and leasing them back, “Wafra fund” secures fixed lease payments and if added to
the residual value of the equipments- at which they are sold by the end of the term- it
also protects the initial capital.
Structured products:•  Only one fund in this survey bases its protection strategy exclusively
on structured products. Located in Malaysia and managed by a CIMB Islamic subsidiary,
“CIMB-I Comm Structured Fund 2” places the bulk of its NAV in “Dynamic Commodity
structured products” issued by the same bank. The investment mechanism was not well
elaborated in the prospectus, but what is understood is that capital protection is secured
through the payouts generated by the structured products and the annual dividends are
linked to the payment of the three best indices offered by CIMB Islamic.

Hence, it appears that capital protection is achieved through basic tools -mainly
using Murabaha transactions and Sukuk- and this is probably the simplest way to achieve this
objective while staying in compliance with Shari’ah. While structured products already nourish
controversies about their Shari’ah compliance, sale-and-lease-back transactions may imply
substantial administrative, supervision and maintenance costs. Dynamic asset allocation might
not be favored as well. It requires constant monitoring and the implementation of certain
algorithms necessary for portfolio balancing. Therefore, the majority of the Islamic protected
funds opt for the static conservative investments and trade financing as they are basic and easy
to implement. CPPI, either in its original version or the enhanced version was found only in
limited cases. Evidently, CPPI could be easily adapted to fit in the Islamic context. Nevertheless,
few Islamic funds seem ready to embrace it, for the moment.

Two countries deserve particular attention in this survey, due to the relevance of their
capital protected funds industries and their intriguing features. These are Saudi Arabia and
Malaysia. Saudi Arabia has the highest concentration of Islamic capital protected funds and is
home to the largest funds. A notable feature of these products is that all of them are open-
ended. And since we referred to the Saudi Stock Exchange, it is obvious to have them all listed
in Tadawul. Furthermore, the dominance of trade funds is striking: according to a World Bank
Report (2010)1 trade finance funds account for 64% of Saudi Mutual funds. One possible reason
for the large share of trade or Murabaha funds in the Saudi market is the fact that the majority
of bank accounts are free demand deposits. Hence, Murabaha funds play the role of Islamic
investment accounts in other regions.

42 Capital Protected Funds Survey

From the data available, we can say that Saudi funds are highly liquid and seem to be in
good shape. The oldest fund of the final selection “International Trade Finance Fund (Sunbullah
USD)” which is a trade fund, recorded 1,432,282 unit cancellations and 1,284,424 unit creations
for the year ended 2010. The “Al Hadi Sharia Compliant Fund”, an actively managed cautious
fund, displayed 2,213,818 unit creations and 163,766 unit cancellations in 2010. Finally, the best
performing Islamic protected funds in KSA are relatively old. The most recent was established in
2010 while the others were launched pre-2006.

Islamic protected funds in Malaysia, similar to their conventional counterparts covered
previously in Asia protected funds survey, are all closed and medium term, between 3 to 5
years. Additionally, all of them are not listed, but this has nothing to do with the regulation.
Malaysia has been issuing protected funds over the last decade, and as they are medium term,
it is understandable to have in hand the newly established ones. Ultimately, 2 out 3 funds have
limited their exposure to equity using static investment approach, whereas “CIMB-I Comm
Structured Fund 2” is the sole fund that has recourse to structured products and it appears to
face a huge wave of cancellations– 86,396,627 units cancelled against zero created in 2010.

Asset classification of Islamic Protected funds differs from that of their conventional peers.
Actually, Islamic funds have recourse to underlying contracts in their transactions. Therefore, the
survey revealed a clear dominance of Mixed Cautious Assets that combine a high proportion
of fixed income securities (Murabaha transactions and Sukuk) and a small portion of Islamic
equities. They are followed by Trade Financing Assets that are based on Murabaha transactions.
Equipment lease or structured products have a limited presence. The usual method of valuation
is based on forward pricing.

43Capital Protected Funds Survey

1 www.lipperleaders.com
A brief presentation on Lipper can be found in Annex3
Total Return: The Lipper Rating for Total Return denotes a fund that has provided superior total returns (income
from dividends and interest as well as capital appreciation) when compared to a group of similar funds.The Lipper
Rating for Total Return may be the best fit for investors who want the best historical return, without looking at risk.
2 http://tools.morningstar.co.uk/uk/fundscreener/default.aspx?Site=uk&LanguageId=en-GB
A brief presentation on Morningstar can be found in Annex 4.
3 YTD describes the return so far this year. The period beginning 1st Januaryof the current year up until today’s date.
4 For the funds that are rated by Lipper, the data related to the “Total net assets” is that of 29 February 2012. For UK
funds, other sources have been used such as http://www.morningstar.co.uk/uk/ and http://funds.ft.com these are
of 29th February or 15th March.

Survey of European Protected FundsVII.

Funds screening -Methodology1.
We applied the Lipper Filter to select Capital protected funds with the highest ratings in •
terms of “total returns”.1

The list of countries we scrutinized under Lipper are: France, Spain, Italy, Germany, •
Switzerland, Luxembourg, Sweden, Belgium, and Austria.
Capital protected funds in UK are not rated. Hence, most of them didn’t appear on •
Lipper. Instead, we used the Morningstar fund screener.2

For UK, we selected the funds having the highest Year to Date (YTD) rate of return.• 3

The data are relative to September 2011.•

Survey’s selection2.

Fund’s name Performance Type of assets
Total net assets1

(Currency of
denomination)

Total net
assets

($
Million)

UK Scottish Widows Capital Protected 10 6.70% (YTD) Equity 226.72 M GBP 358.66

UK Scottish Widows Protected Cap Sol 5 3.25% (YTD) N/A 54.42 M GBP 86.09

UK HSBC Capital Protected 12 Retl 3.02% (YTD) Mixed assets 12.90 M GBP 20.41

UK Scottish Widows Protected Cap Sol 4 1.43% (YTD) N/A 76.17 M GBP 120.50

UK IFDS Omnis JP Morgan Protector 80 2 A 1.34% (YTD) Mixed assets 14.57 M GBP 23.05

UK IFDS Omnis JP Morgan Protector 80 A 0.80% (YTD) Mixed assets 7.99 M GBP 12.64

UK CMIG GA 90% Flexible 0.77% (YTD) Mixed assets 18.41 M GBP 29.12

Switzerland Archimedes Invest Plus Fund – CHF 5 (lipper) Mixed assets 13.15 M CHF 14.39

France Atout Prem’s Actions 5 (lipper) Mixed assets 131.82 M EUR 174.02

France Atout Serenactions 5 (lipper) Equity 183.31 M EUR 241.99

France BNP Paribas Cliquet US 5 (lipper) Bond 112.78 M EUR 148.88

France Fortis Form 2012 5 (lipper) Mixed assets 3.73 M EUR 4.93

France Murano Plus 5 5 (lipper) Equity 17.80 M EUR 23.50

France Murano Plus 8 5 (lipper) Equity 9.76 M EUR 12.88

France Murano Plus 8 Assurance 5 (lipper) Mixed assets 33.75 M EUR 44.56

Belgium Fortis B Fix 2008 Alpha Plus 01 Dis 5 (lipper) Equity 3.56 M EUR 4.70

Belgium Fortis B Fix 2008 Best of Belgium 02 5 (lipper) Equity 8.44 M EUR 11.15

Belgium Fortis B Fix 2008 Duo 01 Double Six Dis 5 (lipper) Equity 12.97 M EUR 17.12

Belgium Fortis B FIx 2008 Lookback 02 5 (lipper) Equity 2.11 M EUR 2.78

Belgium KBC Districlick Conservative Opportunity 1 5 (lipper) Equity 3.35 M EUR 4.43

Belgium KBC EquiMax Asia 10 5 (lipper) Equity 16.87 M USD 16.87

Belgium KBC EquiMax ECO Water 1 5 (lipper) Equity 35.02 M EUR 46.23

44 Capital Protected Funds Survey

1 We refer to the above mentioned statistics as of March 2003 published by “The European Savings and Investment
Outlook”

Luxembourg Cominvest Infrastruktur Safe Kick 3/2014 5 (lipper) Mixed assets 3.35 M EUR 4.42

Luxembourg DMC Dyn Flooring Fd Expo Bonds Europe DF R EUR 5 (lipper) Bond 30.19 M EUR 39.86

Luxembourg
DMC Dyn Flooring Fd Expo Bonds Europe MAS R
EURO

5 (lipper) Bond 10.01 M EUR 13.21

Luxembourg DMC Dyn Flooring Fd Expo Bonds USD DF R USD 5 (lipper) Bond 7.63 M USD 7.63

Luxembourg DMC Dyn Flooring Fd Expo Bonds USD MAS R USD 5 (lipper) Bond 12.78 M USD 12.78

Luxembourg Global Partners CSOB Bull & Bear 2 5 (lipper) Bond 91.09 M CZK 4.87

Luxembourg Global Partners CSOB Asian Click Plus 1 Cap 5 (lipper) Bond 288.80 M CZK 15.45

Germany Pioneer Funds Austria - Trend Bond A 5 (lipper) Bond 237.45 M EUR 313.46

N/A: data are not available.

Table 10: Pre-selection of Europe Capital Protected Funds (February 29, 2012)

The best performing funds in the UK were established after the financial crisis, unlike the
rest of the surveyed funds that were set up before 2008. UK protected funds in this list have the
peculiarity of being short to medium term (3-5 years) and renewable at investors discretion. The
six others are of 7 to 10 years tenure and investors have to be locked-in until the maturity date to
benefit from the capital protection. This confirms the evolution of capital protected funds post
crisis, as outlined in chapter III - that the investment terms tend to be shorter than before.

Though established post-2008, UK funds use the Bond & Call Option technique, one
of the oldest protection techniques, and the traditional version of CPPI. This can probably
be explained by the unpopularity of the protected funds few years ago1 which points to the
fact that the industry players might not have had enough time to structure/experience new
features. The “IFDS Omnis JP Morgan Protector 80 2 A”, is however, an exception. It came with
an uncommon investment mechanism: A swap with JP Morgan. The fund makes payments to
JPMorgan Chase Bank, which in turn agrees to make payments back to the fund based on the
return of an investment portfolio and a cash element. This indicates that protected funds post-
crisis got creative.

As noticed generally, capital protection is sophisticated in Europe even for funds
established before 2008. It certainly reflects the importance of the market and the long history
of this industry in the continent. The statement is particularly true for France- the leading market
for capital protected funds- where one of the oldest funds “BNP Paribas Cliquet US” has been
using, since 1998, a dynamic protection floor in the CPPI meant to lock the share price at the
highest level achieved.

Final selection3.
The number of funds to be scrutinized was finalized based on the relevance of the •
financial activity in the selected countries. Hence, we have included four funds from the
UK, two from France, one from Luxembourg, one from Switzerland, one from Belgium
and one from Germany.
As all the pre-selected funds have a high rating in terms of “total return”, we randomly •
choose the protected funds to be shortlisted for the survey.
If an investment company is recurrent, we choose only one sample fund. Thus, it would •
be more likely to cover different management styles.
As a result, the final selection of funds for Europe is as follows :•

45Capital Protected Funds Survey

UK Switzerland France Belgium Luxembourg Germany

NAV Average 107.81 14.39 161.45 4.70 39.86 313.46

NAV Median 26.09 14.39 161.45 4.70 39.86 313.46

Number of Funds 4 1 2 1 1 1

0.00

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250.00

300.00

350.00
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 M

ill
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A value of “0” means that the information was not available at the time of data collection.

Figure 9: Europe final selected funds aggregation

Fund’s name Performance Type of assets Total net assets

UK Scot Wid Capital Protected 10 6.70% (YTD) Equity 226.72 M GBP

UK HSBC Capital Protected 12 Retl 3.02% (YTD) Mixed assets 12.90 M GBP

UK IFDS Omnis JP Morgan Protector 80 2 A 1.34% (YTD) Mixed assets 14.57 M GBP

UK CMIG GA 90% Flexible 0.77% (YTD) Mixed assets 18.41 M GBP

Switzerland Archimedes Invest Plus Fund- CHF 5 (lipper) Mixed assets 13.15 M CHF

France Atout Prem’s Actions 5 (lipper) Mixed assets 131.82 M EUR

France BNP Paribas Cliquet US 5 (lipper) Bond 112.78 M EUR

Luxembourg DMC Dyn Flooring Fd Expo Bonds Europe DF R EUR 5 (lipper) Bond 30.19 M EUR

Belgium Fortis B Fix 2008 Alpha Plus 01 Dis 5 (lipper) Equity 3.56 M EUR

Germany Pioneer Funds Austria - Trend Bond A 5 (lipper) Bond 237.45 M EUR

Table 11: Final selection of Europe Capital Protected Funds

46 Capital Protected Funds Survey

Survey results4.

The approacha.

For each fund, we tried to collect the respective prospectus and the latest annual report, •
if available.
In the prospectus, we looked for information related to: type of fund, type of assets, •
protection strategy and fund valuation.
For the funds where the predominant type of assets was not mentioned by the fund •
screener (UK funds), we examined the respective prospectus and Morningstar (www.
morningstar.com) to confirm their asset allocation. In the annual report, we confirm the
type of asset by examining the asset allocation, and if the information is available, we try
to address the redemption/subscription frequency. This is presented in the form of units
created or canceled during the financial year. We mention (N/A) in the Redemption/
subscription frequency cell if the information is not available or if we were unable to
find the annual report.
Pertaining to secondary trading, we browse the respective stock exchange markets and •
check whether the ISIN (International Securities Identification Number) code of the fund
or its name is listed in the market. If so, we consider that fund units are traded in the
secondary market, otherwise no.

47Capital Protected Funds Survey

1 Please refer to Annex 1 for a detailed explanation of the participation rate.

b. Funds’ profiles

Scottish Widows Capital Protected 10

Investment and protection strategy 

Cash Investment Period: (28 January 2009 to
11 June 2009)

The period during which money can be •
invested into the fund.
During this period, the fund invests •
principally into deposits, in cash or near
cash or collective investment schemes until
the Derivative Date.

Growth Potential Period: (Derivative date 25
June 2009, Protection date 11 June 2015)

This is the period during which the fund •
invests in Derivatives.

How capital protection is calculated:o

The aim of capital protection is to return the •
original investment at the Protection Date.
This is calculated as follows:
Capital protection price• : The minimum share price the fund expects to return on the
protection date.
Capital protection value• : The capital protection price multiplied by the number of shares
held. If an investor keeps his shares until the Protection date, the Capital protection
value should be equal to the amount of his original investment plus any interest earned
until the start of the Growth Potential Period. The Capital protected period includes the
full initial charges deducted at the start of the investment.

Type of investments:o

The fund invests in derivatives that are structured to deliver this capital protection and •
to provide the Participation Rate1 in the Index.
The value of these derivatives depends on an expected future price of an underlying •
asset, which are either shares or the FTSE 100 index.

What the investor might get backo

What the investor gets back depends on the performance of the fund (FTSE 100 •
performance) and when the investor sells his units. We suppose that the investor keeps
his shares until the protection date.
The fund aims to provide a minimum return of the capital invested. •
Cap• : the cap sets the maximum additional amount you can get, as a percentage of the
Capital Protected Value. The cap for “Capital Protected fund 10” is 33.33% which means
the maximum you can receive back at the end of the term is the Capital Protected Value
plus an additional 33.33% of that value.
The additional amount the fund aims to provide will be based on 150% (the participation •
rate) of any growth of the FTSE 100 index over the Growth Potential Period, after allowing
for Averaging. Any additional amount will be subject to the Cap (a maximum of 33.33%
of the capital protected value).

Financial institution:	  The fund is
established by Scottish Widows
Investment Solutions Funds ICVC.
Inception date:	  28th January 2009.
Investment Objective:	  The Fund
aims to provide investors with
a Capital Protected Price on the
Protection Date and to offer capital
growth linked to the performance
of a stock market index, during the
growth period.
Type of assets:	  Equity.

48 Capital Protected Funds Survey

1 Sources:
Fund’s profile:
http://www.morningstar.co.uk/uk/snapshot/snapshot.aspx?id=F000003Y4G
The prospectus could be downloaded from:
http://www.morningstar.co.uk/uk/snapshot/snapshot.aspx?id=F000003Y4G&tab=12

Averaging• : An average of the daily closing levels of the index is taken over the last 12
months of the Growth Potential Period. This is compared with the closing levels of the
index on the Derivative date to determine whether there has been any rise in the Index
during the period when the fund is invested in derivatives.
Averaging is intended to provide the investors with extra protection from sudden changes •
in the level of the index; however, it could also have the effect of reducing growth. The
level of the index that would be calculated at the end of the Growth Potential Period
could be higher or lower than the actual level of the index.
The Cap on the additional amount could mean that the investor receives less growth •
compared to investing directly in the stock market.

At the Protection date
At the protection date, the fund aims to deliver its investment objective for capital •
protection and growth. This is the only date on which the original investment is
protected.
The investor is then given the choice to invest in another Capital Protected Fund, to •
invest in another fund or to receive the proceeds.

Additional protection:
Derivatives are also used for hedging purposes: cross currency derivatives.•
The capital protection described above is not guaranteed. The Counterparty that provides •
derivatives could fail to meet its obligations which could affect investors’ returns from
the fund.
In order to provide additional protection, collateral is required to be held by an •
independent custodian. The fund aims to hold a collateral of at least 100% of the value
of derivatives at any time, to be used if the counterparty fails to meet its obligations.1

49Capital Protected Funds Survey

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50 Capital Protected Funds Survey

1 Simplified Prospectus:
http://www.morningstar.co.uk/uk/funds/snapshot/snapshot.aspx?id=F000002K0F&tab=14&DocumentId=53e0ec75
dba47e8599785d09c42890ab&Format=PDF

HSBC Capital Protected 12 Retl

Investment strategy

HSBC Capital Protected 12 Retl is a sub-fund •
structured under the Umbrella Company
“HSBC Specialist Investment Funds”.
The Capital Protected Fund follows an •
investment cycle:1

The Limited Issue Period/or Cash Period: 29
September 2008 – 9 January 2009

Investments can only be made into a Capital •
Protected Fund during a Limited Issue
Period. Throughout this period, the Fund
holds cash deposits and money market
instruments, which may include other
collective investment schemes.

Capital Protected Period: 30 January 2009 - 30
January 2015

At the start of the Capital Protected Period •
your Capital Protected Amount is calculated.
This amount includes your original investment, without any deduction for an initial
charge, plus any growth in the value of your shares during the Limited Issue Period.
The Fund then invests in derivatives in order to achieve the aim of providing capital •
growth linked to an index or indices and a protected minimum amount at the end of the
Capital Protected Period.
The value of each share shall be increased by “Participation Rate” in the capital rise, if •
any. “Participation Rate” means the percentage growth in the Relevant Index (FTSE 100
Index or any such other index). For this particular fund, the participation rate is 100%.
The investments will not be subject to an active portfolio management during the Full •
Investment Period, or the Early Release Investment Period as applicable, and they will
be retained until the Termination Date.
The fund manager may decide, on or before the commencement of any “Limited Issue •
Period” of the sub-fund to include, or not to include, an “Early Release Feature”.

Early Release Feature:o

If the Relevant Index rises above the “Early Release Level” on a specified date prior to •
the end of the specified investment term, the Capital Protected Period will cease. The
investor will receive a specified fixed percentage return in lieu of participation of the rise
up to and above the Early Release Level in respect of this Capital Protected Period. For
this particular fund, the “Maximum Return Level” – the maximum percentage growth in
the Capital Protected Amount – is set at 60%.

Financial institution:	  The fund is
managed by HSBC Global Asset
Management (UK) Ltd.
Inception date:	  29th September
2008.
Investment Objective:	  This Fund
aims to provide, at the end of
each “Capital Protected Period”,
a return being at least 100% of
the value of each share held at
the commencement of each
Capital Protected Period. In
addition, the value of each share
shall be increased by, percentage
participation, the “Participation
Rate” linked to the relevant index.
Type of assets:	  Mixed Assets.

51Capital Protected Funds Survey

1 Fund’s Profile:
http://www.morningstar.co.uk/uk/snapshot/snapshot.aspx?id=F000002K0F
2 The annual report for the Year ended 2010, the prospectus and the simplified prospectus could be downloaded
from the following link: http://www.morningstar.co.uk/uk/snapshot/snapshot.aspx?id=F000002K0F&tab=12

End of the capital protection Period:
At the end of the Capital Protected Period the Capital Protected Fund reverts to holding •
cash deposits and money market instruments. The closing level of the index is taken,
which may be the average of a number of readings of the Index, and the growth, if any,
in the index is calculated. The growth will then be reflected in the price of the shares.
Following this, the investment cycle may commence again with another Limited Issue
Period.1

Additional Protection:
In addition to meeting investment objectives, derivatives will be also used for the •
purposes of hedging.2

52 Capital Protected Funds Survey

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o2

53Capital Protected Funds Survey

1 Fund’s Profile:
http://www.morningstar.co.uk/uk/snapshot/snapshot.aspx?id=F00000GY6C

IFDS Omnis JP Morgan Protector 80 2 A

Investment strategy

IFDS Omnis JP Morgan Protector 80 2 A is •
a Sub-fund structured under the Umbrella
Company “IFDS Omnis Investments ICVC”.
The fund provides exposure to a broad •
portfolio of assets whilst aiming to ensure
that the value of the investment does not
fall below 80% of its highest ever value.1

How the fund works
A variation of CPPI:o

The fund aims to achieve its growth and •
protection objectives by having exposure to
two components – an Index Allocation and a
Cash Allocation, as explained below.

The Index Allocation:o  this is the
investment element that the fund
is exposed to, and offers investors
the potential to generate capital
growth by being linked to the
performance of a diverse range of assets including equities, bonds, currencies
and commodities.

The Cash Allocation:o  this aims to provide protection and stability by providing a
return linked to the overnight sterling money market interest rate.

Through active day-to-day management and following a set of rules that define the •
proportion of the fund that is exposed to the Index Allocation and the proportion that
is exposed to the Cash Allocation, the fund aims to benefit from the growth in global
markets whilst protecting 80% of the fund’s highest ever Share Price. The Share Price is
the price at which shares can be bought and sold in the fund.
Up to 100% of the fund resources can be allocated to either the Index Allocation or the •
Cash Allocation in response to market conditions.

The Swap with JP Morgan:o

Rather than investing directly into the Index Allocation and the Cash Allocation, the fund •
will enter into a financial contract with J. P. Morgan Chase Bank, N.A. (JPMorgan). Under
this contract, the fund makes an agreed payment to JPMorgan, who in return makes
payments back to the fund based on the performance of the Index Allocation and the
Cash Allocation.
The purpose of this ‘Swap’ contract is to efficiently implement the investment strategy •
of the fund.
As the fund has entered into a financial contract with JPMorgan and does not physically •
invest into the Index Allocation or the Cash Allocation, JPMorgan is required to provide
collateral to offset the fund’s credit risk. This collateral is in the form of government
bonds from Canada, France, Germany, Japan, UK or the USA, which are considered by
the market to be of high quality and carry low default risk. This collateral is held by the
fund’s custodian in the event of JPMorgan becoming insolvent or otherwise failing to
make payments to the fund.

Financial institution:	  The fund
is managed by IFDS Managers
Limited.
Inception date:	  12th March 2010.
Investment Objective:	  The fund
aims to provide investors with
capital growth over the medium to
longer term. It provides exposure
to a broad portfolio of assets whilst
aiming to ensure that the value of
the investment does not fall below
80% of its highest ever value.
Type of assets:	  Mixed assets.

54 Capital Protected Funds Survey

1 Fund’s Brochure:
http://www.omnisinvestments.com/docs/Omnis%20JPM%20Protector%2080%20Fund%20brochure.pdf
2 The prospectus and the annual report of the Year ended 2010 can be downloaded from the following link:
http://www.morningstar.co.uk/uk/snapshot/snapshot.aspx?id=F00000GY6C&tab=12

How the investment index works:
The Index Allocation is linked to the performance of the J.P. Morgan Efficient Frontier •
(GBP) Index. The Index provides exposure to different asset classes such as equities,
bonds, currency and commodities.
The objective of ‘Efficient Frontier’ methodology is to determine the mix of asset classes •
that would have provided the highest return for a specific level of risk.1

The protected Price and how it works:
Every day, the price at which shares can be bought and sold in the fund varies – this is •
known as the Share Price. The fund aims to protect 80% of the highest Share Price ever
achieved – this is known as the Protected Price.
In practice, this means that each time the Share Price reaches a new high, the Protected •
Price will increase to 80% of the new Share Price level. However, if the Share Price falls,
the Protected Price stays the same.1

55Capital Protected Funds Survey

1  L
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ni

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ga

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r

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M
ix

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fe
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et

s:
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on
ey

m

ar
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en

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ar
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f C

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I:

a)
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de
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A
llo

ca
tio

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an

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th

e
Ca

sh

A
llo

ca
tio

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va

ry
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ep
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t

co
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on

s.

b)
 T

he
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ix
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f a
ss

et
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la
ss

es
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at
 c

om
po

se
s

J.P
. M

or
ga

n
Effi

ci
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t F
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nti
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BP

)
In

de
x,

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ar

y
de

pe
nd

in
g

on
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ei
r

pe
rf

or
m

an
ce

 in
 th

e
m

ar
ke

t.
c)

 T
he

 p
ro

te
cti

on
 fl

oo
r

is
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yn
am

ic
 to

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m

it
th

e
do

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n-

si
de

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is

k
of

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e

un
its

: 8
0%

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th
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hi
gh

es
t S

ha
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SW
A

P
w

it
h

JP
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or
ga

n:
a)

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he

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nd

 m
ak

es
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ay
m

en
ts

 to
 JP

M
or

ga
n

Ch
as

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Ba

nk
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ho

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 re

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ac

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to

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se
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on
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n
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t.

b)
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or

ga
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is
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rc
ed

 to
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se

nt

co
lla

te
ra

l t
o

off
se

t t
he

 fu
nd

’s
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re
di

t
ri

sk
.

N
/A

Ye
s1

56 Capital Protected Funds Survey

1 Fund’s profile: http://funds.ft.com/uk/Tearsheet/Summary?s=GB00B4W96W62:EUR
2 Prospectus, pp.21-22: http://www.clerical-medical.com/sicav/dl_docs/Prospectus%20201003%20-%20final%20
visaed.PDF

CMIG GA 90% Flexible

Investment strategy  

CMIG GA 90% Flexible is a Sub-fund of the •
Umbrella Fund “Universe, the CMI Global
Network Fund”.
Profile of the Typical Investor: This Sub-Fund •
is suitable for investors who seek capital
growth over a long-term period (3-5 years)
through a high to very high-risk investment.
The investor must have experience in volatile •
products and must be able to accept losses
of up to 10% of its original investment, while
the remaining 90% of the initial capital is
protected.
To achieve long term capital growth the fund •
would invest in a portfolio of:

Equity securities: namely the Euro o
Stoxx 50 share index.

Safe assets: for instance, Euro o
denominated short-term securities
and short-term instruments, money
market instruments and deposits with credit institutions.1

Protection strategy: (A variation of CPPI)
Equity and equity related securitieso

To achieve long term capital growth, the fund invests in equities of the Euro Stoxx 50 •
share index. Index futures and investments in contracts for differences may be used as
determined from time to time by the Manager with the objective of gaining exposure to
equities within the Euro Stoxx 50 Share index in a more effective manner.
The allocation to equity and equity related securities will vary between 0% to 43.2% of •
the fund’s NAV depending on market conditions and fluctuation of the equity securities
in the Dow Jones Euro Stoxx 50 share index and related index futures.
Contracts for differences will only be entered into by the Fund when the counterparty •
is a first class financial institution specialized in this type of transaction. Hence, the
counterparty risk, entailed with this type of private agreements, would be minimized.
The total commitments resulting from the use of financial derivative instruments may •
not exceed the total NAV held by the Sub-Fund.

Safe assetso

To achieve the objective of capital preservation, the manager will invest temporarily or •
for a longer term, a substantial portion of the assets of the Sub-Fund (between 56.8 and
100%) in Euro denominated short-term securities and short-term instruments, money
market instruments and deposits with credit institutions.2

Financial institution:	  The
fund is managed by CMI Asset
Management.
Inception date:	  1st April 2009.
Investment Objective:	  The Fund
seeks to achieve long-term capital
growth by investing in a portfolio of
equity securities of the Euro Stoxx
50 share index, and by investing
also in Euro denominated Bonds.
Type of assets:	  Mixed assets.

57Capital Protected Funds Survey

1  T
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s:
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ho
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te

rm
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iti
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on

ey

m
ar

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tr

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sk
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ts
: S

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de

x
“D

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ne
s

Eu
ro

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to

xx

50
”a

nd
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la
te

d
in

de
x

fu
tu

re
s.

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pe

n-
en

de
d

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/A

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ar
ia

ti
on

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f C

PP
I:

a)
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xp
os

ur
e

to
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qu
ity

 a
nd

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qu

ity
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la
te

d
se

cu
ri

tie
s

is
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m
ite

d
to

 4
3.

2%
 o

f t
he

N

AV
.

b)
 T

he
 p

or
tio

n
of

 s
af

e
as

se
ts

 c
ou

ld
 g

o
up

 to
 1

00
%

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f t

he
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AV
 d

ep
en

di
ng

on

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e

m
an

ag
er

’s
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ol
ic

y
an

d
m

ar
ke

t
co

nd
iti

on
s.

A
dd

iti
on

al
 P

ro
te

cti
on

:
In

de
x

fu
tu

re
s

an
d

ot
he

r
in

de
x

re
la

te
d

de
ri

va
tiv

es
 a

re
 a

ls
o

us
ed

 to
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ed
ge

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ga

in
st

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e

ex
is

tin
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eq
ui

ty
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iti

on
.

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e

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nd

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AV
 is

•

ca
lc

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as
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n

da
ily

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ar
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in
g.

N
o1

58 Capital Protected Funds Survey

1 Fund’s profile:
http://www.morningstar.ch/ch/snapshot/snapshot.aspx?id=F000000EKI
2 The prospectus could be downloaded from the following link: http://globaldocuments.morningstar.com/
documentlibrary/dochistory.aspx?investmentId=F000000EKI&investmenttype=1###

Archimedes Invest Plus Fund - CHF

Investment strategy 

The assets of the segments will be •
invested according to the principle of
risk diversification in securities and other
investments.
The fund is suitable for investors with long-•
term growth prospect.

Protection strategy:
To secure the initial capital and to achieve •
a long-term capital gain, the fund invests
primarily in relatively safe assets (at least
51% of the fund’s NAV).
The portfolio is mainly composed •
of: fixed and / or floating rate debt
securities and debt securities of
private, semi-public and / or public-sector
borrowers worldwide (bonds, , notes, zero
coupon bonds, floating rate notes,
convertible bonds and warrants,, etc.),
money market securities as well as deposits.
For investment purposes, the fund uses derivative instruments on recognized and •
sufficiently diversified stock indices (e.g. Swiss Market Index).1

Additional protection:
In addition to the investment purposes, derivatives are also used by the fund for •
hedging.
These include derivative instruments on fixed income securities, currencies, exchange •
traded funds, foreign exchange forward contracts and swaps.
At least two-thirds of fund’s assets are denominated in Swiss Francs (CHF). Besides there are •
assets denominated in other freely convertible currencies. Thus, the derivatives are mainly
used to minimize the currency risk entailed with the assets that are not on Swiss Francs.2

Financial institution:	  The fund
is managed by IFM Independent
Fund Management AG.
Inception date:	  10th January 2006.
Investment Objective:	  Fund’s
objective is to generate long-term
value gains by investments in
bonds and other according to the
investment regulations permitted
investments.
Type of assets	 : Bond.

59Capital Protected Funds Survey

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rc

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ve

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Pl
us

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d
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F

Bo
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:
Ri

sk
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t:
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iv

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lin

ke
d

to
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e
pe

rf
or

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to

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fe
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3

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ly

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af

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as

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ts

:
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t l

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st

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f t

he
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AV
 is

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ve

st
ed

in

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eb

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, m

on
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nd

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its

.
b)

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ur

th
er

m
or

e,
 th

e
fu

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in

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va

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to
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al
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:
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ag
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60 Capital Protected Funds Survey

1 Fund’s profile: http://www.morningstar.fr/fr/snapshot/snapshot.aspx?id=F000000S23

Atout Prem’s Actions

Investment strategy 

The Fund’s investment objective is to:
Offer a daily capital protection up to 90% of •
the Reference NAV. The Reference NAV is
determined as follows:

In the beginning of the civil year it is o
set at 90% of the latest NAV of the
previous year.

During the current year, it is o
reevaluated at 90% of the highest
NAV ever registered.

Participate to the evolution of the two asset •
classes: the risky assets and the safe assets.
This fund has a ‘fund of fund’ structure: the •
management could invest up to 100% of its
NAV in other funds’ shares.

Protection strategy: CPPI
The capital protection will be achieved •
through the CPPI strategy. As a matter of fact, the fund portfolio would be composed
of two assets types. The safe assets would ensure a certain level of capital protection,
while the risky assets would be used to generate capital growth.
The asset allocation would vary depending on the portfolio performance, the interest •
rate level, the capital protection date and how lucrative the risky assets are.
The proportion of risky and safe assets depends on the fall and rise of the fund’s NAV. In •
falling markets, the risky assets share could be as low as 0% of the NAV. However, in the
beginning of the civil year when the Reference NAV is reset, the risky assets could be
reintroduced to drive the fund’s growth.

Safe assets:o

Foreign sovereign Bonds: namely Euro Zone sovereign bonds and the Emerging countries •
sovereign bonds (outside the Euro Zone).
Short term Money Market instruments.•
Deposits.•

Risky assets:o

Company Equities of Small/Medium and Large capitalization belonging to the OECD and •
to the emerging countries.
International Bonds.•
Foreign currencies.•
Derivatives can be used to take exposure, as a substitute to risky assets, but to a •
limited extent.1

Additional Protection:
Derivatives are an integral part of the investment process.•
These are used for hedging and/or arbitrage against credit risk and the risks related to •
equities, exchange rates and volatility.

Financial institution:	  The fund is
managed by Amundi.
Inception date:	  30th November
2007.
Investment Objective:	  The Fund’s
objective is to achieve capital
growth while investing in equity in
debt instruments and to ensure a
certain level of capital protection.
Type of assets:	  Mixed Assets.

61Capital Protected Funds Survey

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62 Capital Protected Funds Survey

1 Morning star, Portfolio Allocation as of 30th June 2011
http://www.morningstar.fr/fr/snapshot/snapshot.aspx?id=F0GBR04L2L&tab=3
2 Fund’s profile
http://www.morningstar.fr/fr/snapshot/snapshot.aspx?id=F0GBR04L2L

BNP Paribas Cliquet US

Investment and protection strategy 

Guarantee contract:
The guarantor (BNP PARISBAS Asset •
Management) is liable to the fund for
ensuring that the shareholders will always
benefit from a protection level fixed at 90%
of the reference NAV for each share.

How the Capital Protection Level is
determined:

During the fund tenure, the Capital Protection •
Level is calculated based on the reference
NAV. The reference NAV is updated in two
circumstances:

For each fund anniversaryo :

 The reference NAV is updated to be equal to •
the NAV calculated for this particular day.
The Capital Protection Level is then equal to •
90% of the new reference NAV.

Within the annual periodo :

During each annual period, whenever the fund NAV increases by 5% compared to the •
reference NAV in force, the fund management proceeds as follows:
The reference NAV is updated to be equal to the NAV that triggered the Cliquet •
Mechanism.
The Capital Protection Level is than raised to reach 90% of this new reference NAV.•

Investment approach: A variation of CPPI
Though Lipper categorizes “BNP Paribas Cliquet US” as an equity fund, the fund invests •
in a large universe and adopts a dynamic asset allocation to achieve the stated objective.
The categorization comes from the fact that equity constitutes the bulk of the portfolio;
by 30 June 2011, it was estimated at 89.89% of net assets.1

Actually, to enhance the portfolio performance and to optimize the return/risk of •
the assets, the fund would adopt a dynamic asset allocation over a variety of assets
depending on the performance of the financial markets.

Financial institution:	  The fund is
managed by BNP PARIBAS ASSET
MANAGEMENT.
Inception date:	  3rd November
1998.
Investment Objective:	  The Fund’s
objective is to benefit from the rise
of S&P 500 index while respecting a
certain level of capital protection.
Type of assets:	  Equity.

63Capital Protected Funds Survey

1 Prospectus:
http://www.amf-france.org/BIO/BIO_PDFS/NIP_NOTICE_PRODUIT/160460.pdf

The fund portfolio is composed of the following assets:• 2

Stocks:o

The fund portfolio is oriented towards French and/or Foreign securities where at least •
75% of the assets should be invested in Stocks belonging to the Stocks Saving Plan “Plan
D’épargne en Actions”.
The fund could also invest in the shares that compose the S&P500 index. •

Debt and Money Market Instrumentso

The fund could invest in Euro denominated interest rate securities namely: French T-bills •
and Deposit Certificates The instrument could be issued by both private and public
institutions.

Other Funds o

The fund may invest up to 100% of its assets in investment funds shares whether French •
or European.

Additional Protection
The fund could be involved in OTC (Over-the-Counter) or Exchange Traded derivatives in •
French and/or Foreign Markets.
The fund may have recourse to these instruments to take exposure or to hedge against •
the risks related to equity/indices, interest rate risks, exchange rate risks and credit
risks.1

64 Capital Protected Funds Survey

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65Capital Protected Funds Survey

1 Fund’s profile:
http://www.morningstar.ch/ch/snapshot/snapshot.aspx?id=F0GBR06BHD

DMC Dyn Flooring Fd Expo Bonds Europe
DF R EUR

Investment strategy:

“DMC Dyn Flooring Fd Expo Bonds Europe •
DF R EUR”is a Sub-fund of the umbrella
fund “DMC Fund”, a Luxembourg mutual
investment fund.
The investment objective of the Sub-Fund is •
to achieve a long term capital increase with a
low well balanced risk profile.
It gives access to the main bond markets of •
the European Union and the market of Swiss
bonds. Only bonds issued or guaranteed by
first class issuers will be considered.
The initial level of the Floor per unit of this •
Sub-Fund has been set at 95% of the initial
issue price.
The Sub-Fund’s objective is to achieve an •
annual long term return above the Citigroup
European WGBI (World Government Bond
Index) expressed in the base currency. This
last objective, as well as the Floor of the Sub-Fund, is not the object of a guarantee.1

Investors’ Profile:
Taking into consideration the risk profile of the DF Sub-Funds described here above, we •
can say that the latter may be appropriate for conservative investors including those
who are not interested in or informed about the capital market, but those who seek a
potentially higher return than is available from a money market fund, but who do not
want to accept the volatility inherent in equity markets.
It is also suitable for more experienced investors wishing to attain defined investment •
objectives in long-term bonds, but with pre-set risk criteria.
The investors should, however be prepared to accept fluctuations in value, caused by •
interest rates movements.
There will be very limited credit risk as the Sub-fund invests only in first quality issuers •
within a very well diversified universe.

Protection strategy: A variation of CPPI
In order to preserve the invested capital the sub-funds adopts a strategy based on •
Dynamic Investment Floor.
The assets are managed in a way to preserve a lower limit of their value (the floor). The •
initial level of this floor for each ‘’DF’’ Sub-Fund is set while it is launched and corresponds
to a given percentage of the initial issue price (95% of the issue price for this sub-fund).

How the investment Floor moves:o

If the NAV per unit rises, • the floor benchmark is also increased, this in order to limit the
down-side risk of the units to a given percentage, not only of the initial issue price, but
also of the highest NAV that has been achieved.

Financial institution:	  The
fund is managed by Dynamic
Asset Management Company
(Luxembourg) S.A.
Inception date:	  16th June 1998.
Investment Objective:	  The Fund
gives access to the main bond
markets of the European Union
and the market of Swissbonds.
Only bonds issued or guaranteed
by first class issuers are considered.
The assets are managed in a way
to preserve a lower limit of their
value (the floor) and to achieve
long term capital growth.
Type of assets:	  Bond.

66 Capital Protected Funds Survey

1 Sources:
Fund Company Website: http://www.dynagest.ch/en/dmc_fund_dynamic_flooring_expo_bonds_europe_df_eur.asp
Full prospectus: http://globaldocuments.morningstar.com/documentlibrary/Document/4efc97be6c2e22e871dd9b2
2ca0959e9.msdoc/original
Simplified prospectus: http://globaldocuments.morningstar.com/documentlibrary/Document/9551290cbd34922276
4cb35aeb3299d3.msdoc/original
Fund factsheet:
http://www.dynagest.ch/TechDetails/EUROPE-DF-EUR.pdf

The floor benchmark per unit will be raised on each Valuation Day by taking into account •
the performance of the net assets; in as far as the highest NAV per unit already achieved
has been exceeded.
The new floor benchmark will, as a minimum, correspond to 95% of the issue price. This •
strategy to limit risks must however be interpreted as an objective to be reached, the
investment floor per unit is not the object of a guarantee, which goes to say, that this is
in no way a guarantee that the NAV per unit will not fall below the last set investment
floor.

Portfolio Components:o

A) Fixed short term transferable securities:•  This component can be considered as the
Sub-Fund’s part with a low risk profile. It is mainly composed of top-quality government
and non-government bonds, mostly denominated in Euros (min 2/3 of net assets). If
they are denominated in another European currency or in Swiss francs, the exchange
rate risk is hedged against Euros.
B) • Well diversified investments into equity and in bond markets, in medium or long
term transferable securities with an anticipated performance and/or other authorized
investment: E.g. financial instruments derivatives, such as financial futures and options
on financial instruments available on regulated futures and options markets, operating
regularly, being recognized and open to the public.
Depending on the evolution of the NAV of a “DF” Sub-Fund, the risk part (B) is increased •
or reduced. Particularly in the case of a decline in the value of the assets of the risk part
(B), these could be even reduced to zero in order to preserve the latest floor set per
unit.

Additional protection:
The Fund may engage in exchange traded derivatives to hedge its transactions.• 1

67Capital Protected Funds Survey

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68 Capital Protected Funds Survey

1 Website:http://www.bnpparibas-ip.be/central/fundsheet/index.page?l=fre&p=IP_BE-NSG&mifidSegment=&shareI
d=2844&compartmentId=839&umbrellaId=74&currency=EUR#tab=1

Fortis B Fix 2008 Alpha Plus 01 Dis

Investment strategy 

“• Fortis B Fix 2008 Alpha Plus 01 Dis” is a
Sub-fund of the Umbrella fund “FORTIS B FIX
2008”.
To achieve the stated objective,•  “Fortis B Fix
2008 Alpha Plus 01 Dis” would particularly
select EURO investments. Thus, the fund
won’t be exposed to exchange rate risk.

Dividends distribution:
The first two dividends were fixed at 6% •
of the initial NAV per share and were
respectively paid on 12th January 2009 and
12th January 2010.
The amount of the six remaining dividends •
will depend on the performance of a basket
composed of, in equal proportions, twenty
stocks from international markets.

Protection strategy: A variation of Bond & Call
option

The fund uses safe assets to protect the initial capital and derivatives instruments to •
take exposure and to achieve capital growth.

Types of deposits and debt instruments:o

The fund could invest in treasury bills, bank deposits, money market instruments and •
debt instruments, whether private or public and domestic or foreign.
These instruments shall at least have a rating of “investment grade”.•

Types of derivatives:o

The underlying assets could be stocks, stock indices or other securities similar to stocks •
and these would involve derivatives like options or swaps to name a few.
Depending on the fund objectives and strategies, the underlying assets could also be •
bonds or bond indices which would involve derivatives like interest rate swaps, credit
default swaps.

Additional protection
Derivatives that are used to achieve the investment objectives could as well be employed •
for hedging purposes.1

Financial institution:	  The fund
is managed by BNP Paribas
Investment Partners Belgium.
Inception date:	  8th January 2008.
Investment Objective:	  The fund
allows the investors to benefit from
8 annual dividends distributions
and aims to protect 100% of the
initial capital, by the end of the
funds tenure fixed at 1st July 2016.
Type of assets:	  Equity.

69Capital Protected Funds Survey

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at
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he

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un

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ur

on
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um
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ar
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Fu
nd

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am

e
Ty

pe
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f a
ss

et
Ty

pe
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f
fu

nd

Su
bs

cr
ip

ti
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Re

de
m

pti
on

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re
qu

en
cy

Pr
ot

ec
ti

on
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ch
ni

qu
e

Va
lu

ati
on

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et

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co

nd
ar

y
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ad
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rti

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lp
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lu

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is

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ui

ty
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fe

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ss

et
s:

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ep

os
its

,
de

bt
 a

nd
 m

on
ey

 m
ar

ke
t

in
st

ru
m

en
ts

.
Ri

sk
y

as
se

ts
: M

ai
nl

y
op

tio
ns

 o
n

st
oc

ks
 a

nd

st
oc

k
in

di
ce

s.

O
pe

n-
en

de
d

N
um

be
r o

f u
ni

ts
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s
at

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1st

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ec

em
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r
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ea

te
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Ca

nc
el

ed
: 1

,6
60

A
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ar
ia

ti
on

 o
f B

on
d

&
 C

al
l O

pti
on

:
a)

 C
ap

ita
l p

ro
te

cti
on

 is
 e

ns
ur

ed
 th

ro
ug

h
de

po
si

ts
 a

nd
 d

eb
t i

ns
tr

um
en

ts
.

b)
 C

ap
ita

l g
ro

w
th

 is
 a

ch
ie

ve
d

th
ro

ug
h

op
tio

ns
 o

n
st

oc
k

an
d

st
oc

k
in

di
ce

s
or

so

m
e

ot
he

r
ty

pe
s

of
 d

er
iv

ati
ve

s.
A

dd
iti

on
al

 P
ro

te
cti

on
:

Th
e

de
ri

va
tiv

es
 th

at
 a

re
 u

se
d

to
 ta

ke
 e

xp
os

ur
e

m
ay

 a
ls

o
be

 u
se

d
fo

r
he

dg
in

g
pu

rp
os

es
.

Th
e

N
AV

 is

•
ca

lc
ul

at
ed

 o
n

th
e

fir
st

 b
us

in
es

s
da

y
of

 e
ac

h
m

on
th

 a
nd

th

e
2n

d
w

or
ki

ng
 d

ay

aft
er

 th
e

14
th

of

ea
ch

 m
on

th
, b

as
ed

 o
n

th
e

la
st

 k
no

w
n

pr
ic

es

fo
r

th
is

 e
va

lu
ati

on
.

 N
o2

70 Capital Protected Funds Survey

1 The simplified prospectus and the fund factsheet could be downloaded from the following link: http://download.
pioneerinvestments.at/jsp/main/all/index.jsp?source=fonds&fonds=FO5059&fundgroup=0&id=0&doctype=0

Pioneer Funds Austria -Trend Bond A

Investment and Protection strategy 

Pioneer Funds Austria - Trend Bond employs •
an active management strategy and invests
exclusively in euro-denominated government
bonds of the Euro-zone.
It will only purchase long term bonds (usually •
with a 7-10 years maturity) having a high
investment grade - AAA to BBB rating.
The interest rate risk could be hedged up to •
100%.
Investments in other funds are permitted •
to a limited extent, 10% of total assets at
the most.

Additional protection:
Derivative instruments are used both to
hedge and, to a greater extent, for active
management of the fund’s strategy, namely
reducing the inherent investment risks1.

Financial institution:	  The fund is
managed by Pioneer Investments
Austria GmbH.
Inception date:	  25th June 2001.
Investment Objective:	  Fund’s
objective is to achieve long term
high yields by investing in Euro
zone government bonds and to
provide safety guards against sharp
yield hikes.
Type of assets:	  Bond.

71Capital Protected Funds Survey

1  T
he

 fu
nd

 w
as

 n
ot

 fo
un

d
in

 F
ra

nk
fu

rt
 S

to
ck

 E
xc

ha
ng

e
w

eb
si

te
:

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p:

//
w

w
w

.b
oe

rs
e-

fr
an

kf
ur

t.
de

/e
n/

fu
nd

s/
se

ar
ch

Fu

nd
s

th
at

 a
re

 u
nd

er
 th

e
sa

m
e

m
an

ag
em

en
t c

om
pa

ny
 w

er
e

lis
te

d.

Pr
ofi

le
 s

um
m

ar
y



Fu
nd

 n
am

e
Ty

pe
 o

f a
ss

et
Ty

pe
 o

f
fu

nd

Su
bs

cr
ip

ti
on

/
Re

de
m

pti
on

 F

re
qu

en
cy

Pr
ot

ec
ti

on
 te

ch
ni

qu
e

Va
lu

ati
on

 M
et

ho
d

Se
co

nd
ar

y
 tr

ad
in

g

Pi
on

ee
r

Fu
nd

s
A

us
tr

ia
 -T

re
nd

Bo

nd
 A

Bo
nd

:
Ri

sk
y

as
se

t:
 L

es
s

th
an

10

%
 n

et
 a

ss
et

s
ca

n
be

in

ve
st

m
en

t i
n

ot
he

r
fu

nd
s.

Sa
fe

 a
ss

et
s:

 E
xc

lu
si

ve
ly

eu

ro
-d

en
om

in
at

ed

go
ve

rn
m

en
t b

on
ds

 in

th
e

eu
ro

 z
on

e.

O
pe

n-
en

de
d

 N
/A

In
ve

sti
ng

 in
 re

la
ti

ve
ly

 s
af

e
as

se
ts

:
Th

e
fu

nd
 in

ve
st

s
ex

cl
us

iv
el

y
in

 E
ur

o-
zo

ne

go
ve

rn
m

en
t b

on
ds

. T
he

se
 a

re
 o

f a
 h

ig
h

in
ve

st
m

en
t g

ra
de

 (A
A

A
 to

 B
BB

) r
ati

ng
.

A
dd

iti
on

al
 p

ro
te

cti
on

:
D

er
iv

ati
ve

s
ar

e
al

so
 u

se
d

to
 h

ed
ge

 a
ga

in
st

in

ve
st

m
en

t r
is

ks
 m

ai
nl

y,
 in

te
re

st
 ra

te
 r

is
k.

Th
e

m
os

t r
ec

en
tly

•

pu
bl

is
he

d
pr

ic
es

 o
f

as
se

ts
 a

nd
 li

ab
ili

tie
s

ar
e

us
ed

 to
 c

al
cu

la
te

th

e
N

AV
.

N
o1

72 Capital Protected Funds Survey

Su
m

m
ar

y
of

 E
ur

op
e

Pr
ot

ec
te

d
Fu

nd
s

Su
rv

ey

c.
 Fu

nd
’s

 n
am

e
Ty

pe
 o

f a
ss

et
s

Ty
pe

 o
f

fu
nd

Re
de

m
pti

on

 F
re

qu
en

cy
Pr

ot
ec

ti
on

 te
ch

ni
qu

e
Va

lu
ati

on
 M

et
ho

d
Se

co
nd

ar
y

 tr
ad

in
g

UK

Sc
otti

sh

W
id

ow
s

Ca
pi

ta
l

Pr
ot

ec
te

d1
0

Eq
ui

ty
:

Sa
fe

 a
ss

et
s:

 D
ep

os
its

an

d
ca

sh
Ri

sk
y

as
se

ts
: D

er
iv

ati
ve

s
lin

ke
d

to
 F

TS
E

10
0

in
de

x

Li
m

ite
d

Is
su

e
N

/A

A
 v

ar
ia

ti
on

 o
f B

on
d

&
 C

al
l O

pti
on

:
a)

 C
as

h
in

ve
st

m
en

t p
er

io
d:

pa

rti
ci

pa
tio

ns
 a

re
 in

ve
st

ed
 in

de

po
si

ts
 o

r
ot

he
r

in
ve

st
m

en
t

co
lle

cti
ve

 s
ch

em
es

.
b)

 G
ro

w
th

 p
er

io
d:

 fu
nd

 in
ve

st
s

in
 in

de
x-

lin
ke

d
de

ri
va

tiv
es

.
A

dd
iti

on
al

 p
ro

te
cti

on
:

a)
 D

er
iv

ati
ve

s
ar

e
al

so
 u

se
d

fo
r

he
dg

in
g

pu
rp

os
es

: c
ro

ss
 c

ur
re

nc
y

de
ri

va
tiv

es
.

b)
 C

ol
la

te
ra

l o
f a

t l
ea

st
 1

00
%

 o
f

de
ri

va
tiv

es
 v

al
ue

 is
 h

el
d,

 a
t a

ny
 ti

m
e,

to

 c
ov

er
 C

ou
nt

er
pa

rt
y

ri
sk

.

Th
e

N
AV

 is
 c

al
cu

la
te

d
•

ba
se

d
on

 fo
rw

ar
d

pr
ic

in
g

du
ri

ng
 th

e
G

ro
w

th

Po
te

nti
al

 P
er

io
d

as
 a

t t
he

va

lu
ati

on
 p

oi
nt

 (b
ei

ng

2.
00

 p
m

) e
ve

ry
 w

ee
k

(F
ri

da
y)

.

N
o

UK

H
SB

C
Ca

pi
ta

l
Pr

ot
ec

te
d

12

Re
tl

M
ix

ed
 A

ss
et

s:
Ri

sk
y

as
se

t:
 In

de
x

re
la

te
d

de
ri

va
tiv

es
.

Sa
fe

 a
ss

et
s:

 C
as

h,
 n

ea
r

ca
sh

, d
ep

os
its

 a
nd

/o
r

m
on

ey
 m

ar
ke

t b
as

ed

co
lle

cti
ve

 in
ve

st
m

en
t

sc
he

m
es

.

Li
m

ite
d

is
su

e
N

/A

Bo
nd

 &
 C

al
l O

pti
on

 te
ch

ni
qu

e:
Ca

sh
 In

ve
st

m
en

t P
er

io
d

fo
llo

w
ed

 b
y

a
G

ro
w

th
 P

er
io

d
us

in
g

de
ri

va
tiv

es
 li

nk
ed

to

 th
e

pe
rf

or
m

an
ce

 o
f F

TS
E

10
0

In
de

x.

A
dd

iti
on

al
 p

ro
te

cti
on

:
D

er
iv

ati
ve

s
ar

e
al

so
 u

se
d

fo
r

he
dg

in
g

pu
rp

os
es

 a
nd

 to
 h

el
p

ac
hi

ev
in

g
in

ve
st

m
en

t o
bj

ec
tiv

es
.

Th
e

N
AV

 o
f t

he
 u

nd
er

ly
in

g
•

fu
nd

s
is

 c
al

cu
la

te
d

on
 a

da

ily
 b

as
is

 u
si

ng
 fo

rw
ar

d
pr

ic
in

g

N
o

UK

CM
IG

 G
A

 9
0%

Fl

ex
ib

le

M
ix

ed
 a

ss
et

s:
Sa

fe
 a

ss
et

s:
 S

ho
rt

te

rm
 s

ec
ur

iti
es

, m
on

ey

m
ar

ke
t i

ns
tr

um
en

ts
 a

nd

de
po

si
ts

.
Ri

sk
y

as
se

ts
: S

ha
re

 in
de

x
“D

ow
 Jo

ne
s

Eu
ro

 S
to

xx

50
”a

nd
 re

la
te

d
in

de
x

fu
tu

re
s.

O
pe

n-
en

de
d

N
/A

A
 v

ar
ia

ti
on

 o
f C

PP
I:

a)
 E

xp
os

ur
e

to
 e

qu
ity

 a
nd

 e
qu

ity

re
la

te
d

se
cu

ri
tie

s
is

 li
m

ite
d

to
 4

3.
2%

of

 th
e

N
AV

.
b)

 T
he

 p
or

tio
n

of
 s

af
e

as
se

ts
 c

ou
ld

 g
o

up
 to

 1
00

%
 o

f t
he

 N
AV

 d
ep

en
di

ng

on
 th

e
m

an
ag

er
’s

 p
ol

ic
y

an
d

m
ar

ke
t

co
nd

iti
on

s.
A

dd
iti

on
al

 P
ro

te
cti

on
:

In
de

x
fu

tu
re

s
an

d
ot

he
r

in
de

x
re

la
te

d
de

ri
va

tiv
es

 a
re

 a
ls

o
us

ed
 to

 h
ed

ge

ag
ai

ns
t t

he
 e

xi
sti

ng
 e

qu
ity

 p
os

iti
on

.

Th
e

Fu
nd

’s
 N

AV
 is

•

ca
lc

ul
at

ed
 b

as
ed

 o
n

da
ily

fo

rw
ar

d
pr

ic
in

g.
N

o

73Capital Protected Funds Survey

UK

IF
D

S
O

m
ni

s
JP

 M
or

ga
n

Pr
ot

ec
to

r
80

 2
 A

M
ix

ed
 a

ss
et

s:
Sa

fe
 a

ss
et

s:
 M

on
ey

m

ar
ke

t i
ns

tr
um

en
ts

Ri
sk

y
as

se
ts

: I
nd

ex

al
lo

ca
tio

n
lin

ke
d

to
 e

qu
iti

es
, b

on
ds

,
cu

rr
en

ci
es

 a
nd

co

m
m

od
iti

es
.

O
pe

n-
en

de
d

N
/A

A
 v

ar
ia

ti
on

 o
f C

PP
I:

a)
 T

he
 In

de
x

A
llo

ca
tio

n
an

d
th

e
Ca

sh

A
llo

ca
tio

n
va

ry
 d

ep
en

di
ng

 o
n

m
ar

ke
t

co
nd

iti
on

s.

b)
 T

he
 m

ix
 o

f a
ss

et
 c

la
ss

es
 th

at

co
m

po
se

s
J.P

. M
or

ga
n

Effi
ci

en
t

Fr
on

tie
r

(G
BP

) I
nd

ex
, v

ar
ie

s
de

pe
nd

in
g

on
 th

ei
r

pe
rf

or
m

an
ce

 in

th
e

m
ar

ke
t.

c)
 T

he
 p

ro
te

cti
on

 fl
oo

r
is

 d
yn

am
ic

 to

lim
it

th
e

do
w

n-
si

de
 r

is
k

of
 th

e
un

its
:

80
%

 o
f t

he
 h

ig
he

st
 S

ha
re

 p
ri

ce
.

SW
A

P
w

it
h

JP
 M

or
ga

n:
a)

 T
he

 fu
nd

 m
ak

es
 p

ay
m

en
ts

 to

JP
M

or
ga

n
Ch

as
e

Ba
nk

, N
.A

.,
w

ho

in
 re

tu
rn

 a
gr

ee
s

to
 m

ak
e

pa
ym

en
ts

ba

ck
 to

 th
e

fu
nd

 b
as

ed
 o

n
th

e
re

tu
rn

of

 a
n

in
ve

st
m

en
t p

or
tf

ol
io

 a
nd

 c
as

h
el

em
en

t
b)

 JP
 M

or
ga

n
is

 fo
rc

ed
 to

 p
re

se
nt

co

lla
te

ra
l t

o
off

se
t t

he
 fu

nd
’s

 c
re

di
t

ri
sk

.

N
/A

Ye
s

Switzerland

A
rc

hi
m

ed
es

In

ve
st

 P
lu

s
Fu

nd

-C
H

F

Bo
nd

:
Ri

sk
y

as
se

t:
 D

er
iv

ati
ve

s
lin

ke
d

to
 th

e
pe

rf
or

m
an

ce
 o

f s
to

ck

in
di

ce
s.

Sa

fe
 a

ss
et

s:
 C

as
h

an
d

fix
ed

 in
co

m
e

se
cu

ri
tie

s.

O
pe

n-
en

de
d

 N
um

be
r

of

un
its

 a
s

at
 3

1st

D
ec

em
be

r
20

10
:

Cr
ea

te
d:

 2
,4

95
Ca

nc
el

le
d:

 1
,4

63

In
ve

sti
ng

 in
 re

la
ti

ve
ly

 s
af

e
as

se
ts

:
a)

 A
t l

ea
st

 5
1%

 o
f t

he
 N

AV
 is

 in
ve

st
ed

in

 d
eb

t s
ec

ur
iti

es
, m

on
ey

 m
ar

ke
t

in
st

ru
m

en
ts

 a
nd

 d
ep

os
its

.
b)

 F
ur

th
er

m
or

e,
 th

e
fu

nd
 in

ve
st

s
in

de

ri
va

tiv
es

 o
n

re
co

gn
iz

ed
 s

to
ck

in

di
ce

s.
A

dd
iti

on
al

 p
ro

te
cti

on
:

a)
 D

er
iv

ati
ve

s
ar

e
al

so
 u

se
d

to
 h

ed
ge

ag

ai
ns

t i
nv

es
tm

en
t r

is
ks

 m
ai

nl
y,

cu

rr
en

cy
 r

is
k.

Th
e

N
AV

 p
er

 s
ha

re

•
w

ill
 b

e
de

te
rm

in
ed

by

 th
e

m
an

ag
em

en
t

co
m

pa
ny

 b
as

ed
 o

n
th

e
va

lu
ati

on
 o

f t
he

 la
st

kn

ow
n

pr
ic

es
.

Th
e

va
lu

ati
on

 is

•
co

nd
uc

te
d

on
 a

 w
ee

kl
y

ba
si

s
ea

ch
 T

ue
sd

ay
.

Ye
s

74 Capital Protected Funds Survey

France

A
to

ut
 P

re
m

’s

A
cti

on
s

M
ix

ed
 A

ss
et

s:
Ri

sk
y

as
se

t:
 S

to
ck

s,

in
te

rn
ati

on
al

 b
on

ds
 a

nd

cu
rr

en
cy

 in
st

ru
m

en
ts

.
Sa

fe
 a

ss
et

s:
 G

ov
er

nm
en

t
bo

nd
s

an
d

M
on

ey

m
ar

ke
t i

ns
tr

um
en

ts
.

O
pe

n-
en

de
d

N
um

be
r

of

un
its

 a
s

at
 3

0th

N
ov

em
be

r
20

10
:

Cr
ea

te
d:

2,

78
6,

13
3

Ca
nc

el
ed

: 3
5,

49
3

A
 v

ar
ia

ti
on

 o
f C

PP
I:

a)
 T

he
 p

ro
po

rti
on

s
of

 in
co

m
e

ge
ne

ra
tin

g
as

se
ts

 a
nd

 s
af

e
as

se
ts

 v
ar

ie
s

ac
co

rd
in

g
to

 fu
nd

pe

rf
or

m
an

ce
 a

nd
 m

ar
ke

t c
on

di
tio

ns
.

b)
 T

he
 p

ro
te

cti
on

 fl
oo

r
is

 d
yn

am
ic

 to

lim
it

th
e

do
w

n-
si

de
 r

is
k

of
 th

e
un

its
:

90
%

 o
f t

he
 h

ig
he

st
 S

ha
re

 p
ri

ce
.

c)
 D

er
iv

ati
ve

s
ca

n
be

 u
se

d
as

 a

su
bs

tit
ut

e
to

 r
is

ky
 a

ss
et

s.
(t

o
ta

ke

ex
po

su
re

)
A

dd
iti

on
al

 p
ro

te
cti

on
D

er
iv

ati
ve

s
ar

e
us

ed
 to

 h
ed

ge
 th

e
ex

po
su

re
 o

n
ri

sk
y

as
se

ts
 a

nd
 fo

r
ar

bi
tr

ag
e.

Th
e

Fu
nd

 N
AV

 is

•
ca

lc
ul

at
ed

 b
as

ed
 o

n
da

ily

fo
rw

ar
d

pr
ic

in
g:

 a
ss

et
s

ar
e

va
lu

ed
 b

as
ed

 o
n

th
e

la
st

 p
ri

ce
 a

va
ila

bl
e

pr
io

r
to

 m
id

da
y

on
 th

e
re

le
va

nt

Va
lu

ati
on

 D
at

e

Ye
s

France

BN
P

Pa
ri

ba
s

Cl
iq

ue
t U

S

Eq
ui

ty
:

Ri
sk

y
as

se
t:

 M
ai

nl
y

st
oc

ks
 a

nd
 S

&
P

50
0

st
oc

ks
 in

de
x

(m
in

 7
5%

).
Sa

fe
 a

ss
et

s:
 G

ov
er

nm
en

t
bo

nd
, m

on
ey

 m
ar

ke
t

to
ol

s
&

 d
ep

os
its

.

O
pe

n-
en

de
d

N
/A

A
 v

ar
ia

ti
on

 o
f C

PP
I:

a)
 P

or
tf

ol
io

 is
 d

yn
am

ic
al

ly
 a

llo
ca

te
d

be
tw

ee
n

th
e

di
ffe

re
nt

 c
om

po
ne

nt
s.

b)
 T

he
 p

ro
te

cti
on

 fl
oo

r
is

 d
yn

am
ic

 to

lim
it

th
e

do
w

n-
si

de
 r

is
k

of
 th

e
un

its
:

90
%

 o
f t

he
 h

ig
he

st
 s

ha
re

 p
ri

ce
 o

f t
he

fu

nd
.

c)
 D

er
iv

ati
ve

s
ca

n
be

 u
se

d
as

 a

su
bs

tit
ut

e
to

 r
is

ky
 a

ss
et

s
(t

o
ta

ke

ex
po

su
re

)
A

dd
iti

on
al

 P
ro

te
cti

on
:

D
er

iv
ati

ve
s

ar
e

us
ed

 to
 h

ed
ge

 th
e

ex
po

su
re

 o
n

ri
sk

y
as

se
ts

.

Th
e

N
AV

 o
f t

he
 fu

nd

•
is

 c
al

cu
la

te
d

ba
se

d
on

fo

rw
ar

d
pr

ic
in

g.

Ye
s

75Capital Protected Funds Survey

Luxembourg

D
M

C
D

yn

Fl
oo

ri
ng

 F
d

Ex
po

Bo

nd
s

Eu
ro

pe

D
F

R
EU

R

Bo
nd

:
Ri

sk
y

as
se

t:
 E

qu
ity

,
m

ed
iu

m
 to

 lo
ng

-t
er

m

bo
nd

s
an

d
de

ri
va

tiv
es

.
Sa

fe
 a

ss
et

s:
 S

ho
rt

-t
er

m

bo
nd

s
an

d
m

on
ey

m

ar
ke

t i
ns

tr
um

en
ts

 (m
in

2/

3
ne

t a
ss

et
s)

. C
as

h
an

d/
or

 te
rm

 d
ep

os
its

in

 E
U

R
(m

ax
 1

/3
 o

f n
et

as

se
ts

)

O
pe

n-
en

de
d

N
um

be
r

of
 u

ni
ts

as

 a
t 3

1st
 M

ar
ch

20

10
:

Cr
ea

te
d:

 4
,4

81
.3

5
Ca

nc
el

le
d:

10

,0
00

.5
0

A
 v

ar
ia

ti
on

 o
f C

PP
I:

a)
 T

he
 p

or
tf

ol
io

 is
 d

yn
am

ic
al

ly
 m

an
ag

ed

be
tw

ee
n

sa
fe

 s
ho

rt
-t

er
m

 b
on

ds
 a

nd

m
on

ey
 m

ar
ke

t i
ns

tr
um

en
ts

 (m
in

 2
/3

)
an

d
re

la
tiv

el
y

ri
sk

y
lo

ng
-t

er
m

 b
on

ds

or
 e

qu
ity

.
b)

 T
he

 p
ro

te
cti

on
 fl

oo
r

is
 d

yn
am

ic
 to

lim

it
th

e
do

w
n-

si
de

 r
is

k
of

 th
e

un
its

.
A

dd
iti

on
al

 p
ro

te
cti

on
:

D
er

iv
ati

ve
s

ar
e

us
ed

 to
 ta

ke
 e

xp
os

ur
e

an
d/

or
 fo

r
he

dg
in

g
pu

rp
os

es
.

Th
e

N
AV

 o
f t

he
 fu

nd

•
is

 c
al

cu
la

te
d

ea
ch

W

ed
ne

sd
ay

 b
as

ed
 o

n
fo

rw
ar

d
pr

ic
in

g.
Ye

s

Belgium

Fo
rti

s
B

Fi
x

20
08

A

lp
ha

 P
lu

s
01

D

is

Eq
ui

ty
:

Sa
fe

 a
ss

et
s:

 D
ep

os
its

,
de

bt
 a

nd
 m

on
ey

 m
ar

ke
t

in
st

ru
m

en
ts

.
Ri

sk
y

as
se

ts
: M

ai
nl

y
op

tio
ns

 o
n

st
oc

ks
 a

nd

st
oc

k
in

di
ce

s

O
pe

n-
en

de
d

N
um

be
r

of

un
its

 a
s

at
 3

1st

D
ec

em
be

r
20

08
:

Cr
ea

te
d:

 7
,1

83
Ca

nc
el

ed
: 1

03

A
 v

ar
ia

ti
on

 o
f B

on
d

&
 C

al
l O

pti
on

:
a)

 C
ap

ita
l p

ro
te

cti
on

 is
 e

ns
ur

ed
 th

ro
ug

h
de

po
si

ts
 a

nd
 d

eb
t i

ns
tr

um
en

ts
.

b)
 C

ap
ita

l g
ro

w
th

 is
 a

ch
ie

ve
d

th
ro

ug
h

op
tio

ns
 o

n
st

oc
k

an
d

st
oc

k
in

di
ce

s
or

so

m
e

ot
he

r
ty

pe
s

of
 d

er
iv

ati
ve

s.
A

dd
iti

on
al

 P
ro

te
cti

on
:

Th
e

de
ri

va
tiv

es
 th

at
 a

re
 u

se
d

to
 ta

ke

ex
po

su
re

 m
ay

 a
ls

o
be

 u
se

d
fo

r
he

dg
in

g
pu

rp
os

es
.

Th
e

N
AV

 is

•
ca

lc
ul

at
ed

 o
n

th
e

fir
st

 b
us

in
es

s
da

y
of

 e
ac

h
m

on
th

 a
nd

th

e
2n

d
w

or
ki

ng
 d

ay
 a

ft
er

th

e
14

th
 o

f
ea

ch
 m

on
th

, b
as

ed
 o

n
th

e
la

st
 k

no
w

n
pr

ic
es

 fo
r

th
is

 e
va

lu
ati

on
.

 N
o

Germany

Pi
on

ee
r

Fu
nd

s
A

us
tr

ia
 -T

re
nd

Bo

nd
 A

Bo
nd

:
Ri

sk
y

as
se

ts
: L

es
s

th
an

10

%
 n

et
 a

ss
et

s
ca

n
be

in

ve
st

m
en

t i
n

ot
he

r
fu

nd
s.

Sa
fe

 a
ss

et
s:

 E
xc

lu
si

ve
ly

eu

ro
-d

en
om

in
at

ed

go
ve

rn
m

en
t b

on
ds

 in

th
e

eu
ro

 z
on

e.

O
pe

n-
en

de
d

 N
/A

In
ve

sti
ng

 in
 re

la
ti

ve
ly

 s
af

e
as

se
ts

:
Th

e
fu

nd
 in

ve
st

s
ex

cl
us

iv
el

y
in

 E
ur

o-
zo

ne
 g

ov
er

nm
en

t b
on

ds
. T

he
se

 a
re

 o
f

a
hi

gh
 in

ve
st

m
en

t g
ra

de
 (A

A
A

 to
 B

BB
)

ra
tin

g.
A

dd
iti

on
al

 p
ro

te
cti

on
:

D
er

iv
ati

ve
s

ar
e

al
so

 u
se

d
to

 h
ed

ge

ag
ai

ns
t i

nv
es

tm
en

t r
is

ks
 m

ai
nl

y,
 in

te
re

st

ra
te

 r
is

k.

Th
e

m
os

t r
ec

en
tly

•

pu
bl

is
he

d
pr

ic
es

 o
f a

ss
et

s
an

d
lia

bi
liti

es
 a

re
 u

se
d

to

ca
lc

ul
at

e
th

e
N

AV
.

N
o

Ta
bl

e
12

: S
um

m
ar

y
of

 E
ur

op
e

Pr
ot

ec
te

d
Fu

nd
s

Su
rv

ey

76 Capital Protected Funds Survey

1 http://www.lipperleaders.com/
2 For Morningstar references refer to the hyperlink within the table “Survey Selection”.
3 http://www.fundpro.com/default.aspx
4 For Janus Series, data related to “Total net assets” have been collected from http://www.morningstar.com/
Data are relative to 15th March 2012.
5 For Protected Profile Series, data related to “Total net assets” have been collected from www.lipperleaders.com
Data are relative to 29 February 2012.

Survey of American Protected FundsVIII.

Funds screening -Methodology1.
The funds were selected from different sources. Each fund database and fund screener •
has its own ranking/ screening criteria. Hence, it was hard to establish a global ranking
for the American region. We tried to offer fund ranking by country wherever possible,
otherwise, when lacking data, we only give a sample of protected funds for a given
country..
The countries were selected according to their relevance in terms of financial activity •
and the availability of data related to protected funds. The survey for Americas was
restricted to: USA, Canada, Brazil, Chile and Mexico.
For USA and Canada: We referred more to Lipper screener• 1, but tried to complement the
picture by using Morningstar as well2.
For Brazil and Chile: The data was found only on Lipper screener.•
For Mexico: we used a Mexican fund screener• 3. We selected the four most performing
funds based on the YTD return.
The data are relative to September 2011.•

Survey’s selection2.

Fund’s name Performance
Type of
assets

Total net assets
(Currency of

denomination)

Total net
assets $

USA Janus Protected Series-Growth A Avg (YTD) -11,09% Equity 139.1 M USD4 139.1 M

USA Janus Protected Series-Growth A LW Avg (YTD) -11,09% Equity 139.1 M USD 139.1 M

USA Janus Protected Series-Growth C Avg (YTD) -11,09% Equity 139.1 M USD 139.1 M

USA Janus Protected Series-Growth D Avg (YTD) -11,09% Equity 139.07 M USD 139.07 M

USA Janus Protected Series-Growth I Avg (YTD) -11,09% Equity 139.1 M USD 139.1 M

USA Janus Protected Series-Growth S Avg (YTD) -11,09% Equity 139.1 M USD 139.1 M

USA Janus Protected Series-Growth T Avg (YTD) -11,09% Equity 139.1 M USD 139.1 M

USA Protected Profile 2010 Fund;Service 4 (lipper) Mixed assets 10.20 M USD5 10.2 M

USA Protected Profile 2010 Fund;Standard 4 (lipper) Mixed assets 26.20 M USD 26.2 M

USA Protected Profile 2020 Fund;Standard 4 (lipper) Mixed assets 83.20 M USD 83.2 M

USA Protected Profile 2030 Fund;Standard 4 (lipper) Mixed assets 71.30 M USD 71.3 M

USA Protected Profile 2020 Fund;Service 3 (lipper) Mixed assets 24.80 M USD 24.8 M

USA Protected Profile 2030 Fund;Service 3 (lipper) Mixed assets 18.70 M USD 18.7 M

USA Protected Profile 2040 Fund;Service 3 (lipper) Equity 13.40 M USD 13.4 M

USA Protected Profile 2040 Fund;Standard 3 (lipper) Equity 52.60 M USD 52.6 M

USA Oppenheimer Principal Prot Main Street Fund III;A 1 (lipper) Bond N/A N/A

USA Oppenheimer Principal Prot Main Street Fund III;B 1 (lipper) Bond N/A N/A

USA Oppenheimer Principal Prot Main Street Fund III;C 1 (lipper) Bond N/A N/A

77Capital Protected Funds Survey

http://quote.morningstar.com/TickerLookupResult.html?ticker=janus+protected&pageno=0&TLC=M

USA Oppenheimer Principal Prot Main Street Fund III;N 1 (lipper) Bond N/A N/A

Canada Covington Venture Cap Protected Sr VIII N/A N/A 18.8 M USD1 18.8 M

Canada Covington Venture Cap Protected Sr IX (YTD) 2.51% N/A 18.8 M USD 18.8 M

Canada Dynamic Protected Dividend Value 2 (lipper) Equity 4.6 M CAD2 4.62 M

Canada Dynamic Protected Global Value 2 (lipper) Equity 1.51 M CAD 1.52 M

Canada National Bank Protected Growth Balanced 2 (lipper)
Mixed
assets

1.39 M CAD 1.40 M

Canada National Bank Protected Canadian Bond 1 (lipper) Bond 0.56 M CAD 0.57 M

Canada National Bank Protected Canadian Equity 1 (lipper) Equity 2.1 M CAD 2.11 M

Canada National Bank Protected Global 1 (lipper) Equity 0.77 M CAD 0.78 M

Canada National Bank Protected Retirement Balanced 1 (lipper) Mixed assets 1.92 M CAD 1.94 M

Brazil Citifirst Ibovespa Capital Protegido II FI Mult 5 (lipper) Equity 329.27 M BRL3 183.69 M

Brazil Santander FI Capital Protegido Van Gogh Mult 4 (lipper) Bond 47.24 M BRL 26.35 M

Brazil Prothea FICFI Multimercado 4 (lipper) Mixed assets 2.65 M BRL 1.48 M

Brazil Bradesco FI Mult Principal Protegido 1 (lipper) Mixed assets 10.24 M BRL 5.71 M

Brazil Bradesco Prime FI Mult Principal Protegido 2 1 (lipper) Bond 8.67 M BRL 4.84 M

Brazil Bradesco FI Mult Principal Protegido 1 1 (lipper) Mixed assets 6.69 M BRL 3.73 M

Brazil Bradesco Prime FI Multimercado Principal Protegido 1 (lipper) Mixed assets 18.78 M BRL 10.47 M

Brazil Citifirst Ibovespa Capital Protegido III FI Mult 1 (lipper) Bond 71.91 M BRL 40.11 M

Brazil FI Votorantim Capital Protected III Mult CrdPri 1 (lipper) Mixed assets 77.12 M BRL 43.02 M

Brazil FICFI Votorantim Capital Protected III Mult CrdPri 1 (lipper) Mixed assets 75.70 M BRL 42.23 M

Chile Larrainvial Proteccion APV-A 4 (lipper) Mixed assets 4168.22 M CLP 8.58 M

Chile Larrainvial Proteccion A 3 (lipper) Mixed assets 32647.82 M CLP 67.18 M

Chile Larrainvial Proteccion F 3 (lipper) Mixed assets 1018.78 M CLP 2.10 M

Mexico STGAR-1 B1 (Santander) (YTD) 13.243% N/A
813.88 M
MXN4 63.87 M

Mexico STGAR-2 B1 (Santander) (YTD) 3.884% N/A 730.74 M MXN 57.34 M

Mexico TRIPLE1 GB (BBVA Bancomer) (YTD) 3.747% N/A 3.90 B MXN5 306.04 M

Mexico TRIPLE2 GB (BBVA Bancomer) (YTD) 3.702% N/A 3.61 B MXN 283.28 M

Table 13: Pre-selection of America Capital Protected Funds

1 For Covington Venture Cap Protected Series, data related to “Total net assets” have been collected from:
http://quote.morningstar.ca/quicktakes/Fund/f_ca.aspx?t=F000000QUX&region=CAN&culture=en-CA.
Data are relative to 9th March 2012
2 For National Bank Protected Series, data related to “Total net assets” have been collected from:
www.lipperleaders.com.
Data are relative to 29 February 2012.
3 Data related to the “Total net assets” of Brazil capital protected funds have been collected from
www.lipperleaders.com. Data are relative to 29 February 2012. There are some funds whose data have been
collected from http://www.bloomberg.com. The funds in question are “Citifirst Ibovespa Capital Protegido II FI
Mult”, “FI Votorantim Capital Protected III Mult CrdPri”, “FICFI Votorantim Capital Protected III Mult CrdPri” (Data
are relative to 13th March 2012) and “Santander FI Capital Protegido Van Gogh Mult” (Data are relative to 3rd March
2012).
4 For STGAR-1 B1 and STGAR-2 B1 data related to “Total net assets” have been collected from
http://mx.finance.yahoo.com/q?s=STGAR1B1.MX and http://mx.finance.yahoo.com/q?s=STGAR2B1.MX&ql=1
(as of 31st March 2012) respectively.
5 For TRIPLE1 GB and TRIPLE2 GB data related to “Total net assets” have been collected from
http://mx.finance.yahoo.com/q?s=TRIPLE1GB.MX&ql=0 and http://mx.finance.yahoo.com/q?s=TRIPLE2GB.MX&ql=0
(as of 31st March 2012) respectively.

78 Capital Protected Funds Survey

Final selection3.
The number of funds to be scrutinized was finalized based on the relevance of the •
country. Hence, we have included four funds from USA, two from Canada, two from
Brazil, one from Chile and two from Mexico.
USA: If we select only the well ranked funds we will be restricting our study to one •
company (Protected Profile Fund) and to only one management style. Therefore, we
tried to take samples from different companies, even the underperforming Janus.
Canada: The same was applied to Canada, but “Dynamic Protected” funds were excluded •
due to the non-availability of essential documents (prospectus).
Brazil: We were unable to take a sample from each company but we kept Citifirst and •
Bradesco. Stander was not scrutinized due to the non-availability of the prospectus.
Mexico: Only the two most performing funds were kept.•
Chile: We took the most performing fund.•

USA Canada Brazil Chile Mexico

NAV Average 58.50 10.10 94.70 8.58 184.95

NAV Median 26.20 10.10 94.70 8.58 184.95

Number of Funds 4 2 2 1 2

U
SD

 M
ill

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0.00
20.00
40.00
60.00
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100.00
120.00
140.00
160.00
180.00
200.00

A value of “0” means that the information was not available at the time of data collection.

Figure 10: America final selected capital protected funds aggregation

Fund’s name Performance Type of assets Total net assets

USA Protected Profile 2010 Fund;Service 4 (lipper) Mixed assets 10.20 M USD

USA Protected Profile 2010 Fund;Standard 4 (lipper) Mixed assets 26.20 M USD

USA Oppenheimer Principal Prot Main Street Fund III;A 1 (lipper) Bond N/A

USA Janus Protected Series-Growth A Avg (YTD) -11,09% Equity 139.1 M USD

Canada National Bank Protected Growth Balanced 2 (lipper) Mixed assets 1.39 M CAD

Canada Covington Venture Cap Protected Sr IX (YTD) 2.51% N/A 18.80 M USD

Brazil Citifirst Ibovespa Capital Protegido II FI Mult 5 (lipper) Equity 329.27 M BRL

Brazil Bradesco FI Mult Principal Protegido 1 (lipper) Mixed assets 10.24 M BRL

Chile Larrainvial Proteccion APV-A 4 (lipper) Mixed assets 4168.22 M CLP

Mexico STGAR-1 B1 (Santander) (YTD) 13.243% N/A 813.88 M MXN

Mexico TRIPLE1 GB (BBVA Bancomer) (YTD) 3.747% N/A 3.90 B MXN

Table 14: Final selection of America Capital protected Funds

79Capital Protected Funds Survey

In the final selection, 7/11 of the scrutinized funds are listed and 8/11 are open-ended.
Hence, we can say that most of the funds are listed and open-ended.

We noticed that overall, every country in the selection favors a specific protection
style. In the US, it is common practice to structure the capital protected funds around a CPPI
mechanism combined with an insurance policy provided by a third party. That guarantees a full
return of investors’ principal at maturity. In fact, all the funds short listed in the US follow this
model, except for the “Protected Profile 2010 Fund” that does not use a warranty agreement,
probably because it is a retirement product offered by an insurance company.

According to Morningstar fund analysis (2011), these funds were found to be expensive
zero-coupon treasury bonds because the insurance company that provides the protection
guarantee insists on high allocations to cash and bonds so that they won’t have to disburse
any amount. This explains the limited popularity of capital protected funds in the US. The
“Oppenheimer Principal Prot Main Street Fund III” perfectly illustrates the situation. The fund
was launched in 2004 with the objective of protecting the principal and realizing high total
returns through equity index investments and US government securities under the CPPI. When
the crisis hit, the fund completely and irreversibly converted to a debt fund in 2009. Moving to
cash was dictated by the warranty provider in order to not take exposure to equity and reimburse
investors in case of capital loss. But from the clients side, the dissatisfaction with an expensive
debt fund, low returns and cash lockout was very evident: 120263 units cancelled against 9141
created in the year 2011.

The “Janus Protected Series-Growth A” fund, which was established in late 2011, seems
to have learnt from the imperfections of its predecessors. Most importantly, the investors are
not obliged to remain invested for any specific duration of time to keep the capital protection;
whereas in the past they would forego it for early exits. Janus has also given the warranty provider
added incentives to prevent the fund from being a debt fund with added protection costs. The
warranty provider fee is actually based on assets under management so it has the incentive to
navigate the fund in a way that keeps the shareholders invested. Otherwise, they can withdraw at
any time if the fund remains in cash. Furthermore, the fund’s board has the authority to liquidate
the fund or temporary waive the fees if the fund stays in cash for an extended period. For the
moment, the units issued surpass the cancelled: 4074 against 174. Finally, Janus has recourse
to an enhanced version of CPPI as compared to its peers; the one that employs a “Dynamic
Protection Floor”.

From the two funds scrutinized by the survey, we can say that the capital protected
fund industry is facing some difficulties in Canada. Both the “National Bank Protected Growth
Balanced” and the “Covington Venture Cap Protected Sr IX” did not issue any units while 162 656
and 120 000 were cancelled respectively in 2010. Generally speaking, the protection techniques
deployed are kind of traditional. “National Bank Protected Growth Balanced” created in 1998,
deploys the CPPI in its simplest version. “Covington Venture Cap Protected Sr IX” established in
2007, has a conservative approach that is rather inspired from Bond &Call Option: 70% is invested
in bonds provided that the proceeds will bring the capital to its initial value. The remaining
portion is invested in equity, which avoids the cash lockout posed by the CPPI and allows full
exposure to market upside in the case of recovery. Curiously, both the funds are closed and not
listed which might lead to a liquidity issue in addition to the massive units’ cancellations.

The protected fund industry appears to be better off in Brazil as compared to North
America, be it in terms of numbers of products issuers, numbers of funds or the assets size. The

80 Capital Protected Funds Survey

two funds scrutinized in this survey reveal that the industry apparently favors the Bond &Call
Option approach. This may seem understandable for “Bradesco FI Mult Principal Protegido”,
established since 1997, but it may look less common for new funds like the “Citifirst Ibovespa
Capital Protegido II FI Mult” launched in 2010. Interestingly, “Bradesco FI Mult Principal Protegido”
deploys the Bond & Call Option with a new addition: dynamic asset allocation. The option-linked
investments intended to gain exposure to growth assets may vary according to market conditions.
Ultimately, the tenure of “Citifirst Ibovespa Capital Protegido II FI Mult” is extremely short, less
than a year, which reaffirms the finding about the funds features post crisis.

Just like in Brazil, the two short listed funds in Mexico belong to global financial
institutions. The two have been established recently; “TRIPLE1 GB BBVA Bancomer” in 2008 and
“STGAR-1 B1 Santander” in 2010. They both have a short investment term: less than a year to
benefit from the capital protection. And they both have recourse to highly graded fixed-income
debt instruments as a means to preserve their principal.

“Larrainvial Proteccion APV-A” the Chilean fund also adopts a conservative approach but
uses CPPI. It is a listed open-ended fund, yet the volume of the traded shares is extremely high.
This could probably be justified by their low unit price.

We also found that there is diversity in the asset types in the American region and the
valuation method is usually based on forward pricing. All these details are clarified for each
selected fund in the next section, where we discuss the results of the survey.

Survey results4.

The Approacha.

For each fund we tried to collect the respective prospectus and the latest annual report, •
if available.
In the prospectus, we looked for information related to: type of fund, type of assets, •
protection strategy and fund valuation.
For the funds where the type of assets was not mentioned, we scrutinized the respective •
prospectus and Morningstar (www.morningstar.com) to confirm their asset allocation.
In the annual report we confirm the type of assets by examining the asset allocation, and •
if the information is available we try to address the redemption/subscription frequency.
This is presented in the form of units created or canceled during the financial year.
If such data is not disclosed, we try by the means of simplistic calculation to deduce
it. For instance, we look for subscription proceeds and redemption payments for the
financial year, then we divide it by the average (NAV/share) or, if it is not available, by
the latest NAV. We mention (N/A) in the Redemption/subscription frequency cell, if the
information is not available or if we were unable to find the annual report.
Pertaining to secondary trading, we browse the respective stock exchange markets and •
check whether the ISIN code of the fund or its name is listed in the market. If so, we
consider that fund units are traded in the secondary market, otherwise no.

81Capital Protected Funds Survey

b. Funds’ profiles

LVIP Protected Profile 2010 Fund; Standard
Class

Investment strategy

Structure.
The Profile Fund operates under a ‘fund of •
funds’ structure, whereby under normal
market conditions the fund will invest 80% or
more of its assets in underlying funds. These
underlying funds generally have a passive
investment style (i.e index funds).
The Profile Fund’s largest allocation will be •
to underlying funds that primarily invest in
domestic and foreign equity securities. A
smaller allocation will be made to underlying
funds that primarily invest in domestic fixed
income securities.

Protection strategy: A variation of CPPI
The adviser will regularly evaluate the level •
of market volatility to determine the desired
level of overall economic equity exposure to be held by the Profile Fund (maximum
target equity).
Furthermore, the asset allocation varies depending on the maturity of the fund. The •
Profile Fund is actually designed for investors planning to retire close to the year 2010
(target date). The target date refers to the approximate year an investor in the Profile
Fund would plan to retire and is likely to stop making new investments in the fund.
The investment strategy becomes more conservative over time as the target date draws
closer and the target date occurs.

Until normal circumstances till target date (2010)o

The fund invests at least 80% of its net assets in underlying funds, 55% of which will be •
in underlying funds that invest primarily in equity securities and 45% in underlying funds
that invest primarily in fixed income securities.
As a result of the protection sub-strategy (• see below) , the remaining portion of the
fund’s net assets is expected to be invested in exchange-traded futures contracts, cash
collateral to support these contracts and/or high-quality short term money market
investments.
The asset class allocations in the Profile Fund’s model are not expected to vary from the •
Fund’s current investment strategy by more than (plus or minus) 10% in any given year.

From the target date (2010) till the landing date (2030)o

The Profile Fund’s allocation to underlying funds that invest in equity securities will •
continue to decline until approximately 20 years after its target date, when its allocations
to underlying funds among different types of assets will become fixed (landing date).
Thus, the landing date for the Profile Fund is approximately 2030.
The Profile Fund’s allocation to underlying funds at the landing date is expected to be •

Financial institution:	  The fund is
established by Lincoln Financial
group as part of Lincoln Variable
Insurance Products Trust.
Inception date:	  30th April 2007.
Investment Objective:	  To seek
the highest total return over time
with an increased emphasis on
capital preservation as the target
date approaches. Thereafter, an
emphasis will be placed on high
current income with a secondary
focus on capital appreciation.
Type of assets:	  Mixed assets,
through the underlying funds, the
Profile Fund owns a diversified mix
of equity securities (stocks) and
fixed income securities (bonds).

82 Capital Protected Funds Survey

1 Sources:
Website:
http://www.lfg.com/LincolnPageServer?LFGPage=/lfg/acc/fprod/life/vlife/index.html&LFGContentID=/lfg/acf/prd/
vip/stdclass
Annual report:
http://www.lfg.com/lfg/DOCS/lfgclient/lvip/sar-lvip-TargetProfile.pdf
Prospectus:
http://www.lfg.com/lfg/DOCS/lfgclient/lvip/p-lvip-std-2010Profile.pdf

at least 80%, 25% of which will be in underlying funds that invest primarily in equity
securities and 75% in underlying funds that invest primarily in fixed income securities.
Because of the protection sub-strategy, the portion not invested in underlying funds •
will be invested in exchange-traded futures contracts, cash collateral to support these
contracts and/or high-quality short-term money market investments.
However, the net economic exposure to equities at the landing date may vary between •
0% in extreme market conditions and 25% in more benign markets. Under normal
market conditions, the adviser expects the fund’s total economic exposure to equities at
the landing date to be between 15% and 25%.

Protection sub-strategy:
The Fund also employs an actively managed risk-management overlay that invests in •
exchange traded futures to hedge against equity market downside risk. The sale of a
futures contract enables the fund to lock in a price at which it may sell the financial
instrument and protect against declines in the value of the underlying funds that
primarily invest in equities.
The adviser may also periodically utilize long positions (purchase exchange-traded •
futures contracts) to increase the overall level of economic exposure to equity securities
held by the fund at any given time, typically where the fund is holding idle cash that is
awaiting investment in underlying fund.

LVIP Protected Profile 2010 Fund; Service Class:

LVIP Protected Profile 2010 Fund Standard Class and Service Class are identical, except that Service
Class shares are subject to a distribution fee, which has been adopted pursuant to a distribution
and service plan. The Trust offers shares to insurance companies for allocation to some of their
variable contracts. The Trust pays the Trust’s principal underwriter, Lincoln Financial Distributors,
Inc. (LFD), out of the assets of the Service Class, for activities primarily intended to sell Service
Class shares or variable contracts offering Service Class share.1

83Capital Protected Funds Survey

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84 Capital Protected Funds Survey

1 Summary prospectus: https://ifp.ifunddirect.com/viewer/cik/C000020557/summary_prospectus

Oppenheimer Principal Prot Main Street
Fund III;A

Investment strategy

Structure:
It is a ‘Fund of funds’ structure that invests in •
equity related index funds as it also invests
in US government securities. However, from
January, the fund started investing only in
debt portfolio.
The fund has an offering period, a warranty •
period and a post warranty period.

Offering period: The fund shares were offered
during the offering period (7 October 2004
to 10 December 2004) but not during the
warranty period, except in connection with the
reinvestment of dividends and distributions.

Warranty period and protection strategy:
During the warranty period (16 December •
2004, 16 December 2011the “Maturity
Date”) the fund will primarily seek capital preservation and secondarily, a high
total return.
The protection strategy looks like a variation of CPPI•
Prior to 12 January 2009, the fund used to allocate its assets between an equity portfolio •
(investing in equity index funds) and a debt portfolio (US government securities). Under
the warranty formula, between zero and 100% of the fund’s assets can be allocated to
equity portfolio.
The Warranty agreement contains a mathematical formula (The Warranty Formula) that •
provides the maximum amount of the fund’s assets to be invested in equity portfolio on
any given day during the warranty period.
12 January 2009 and onwards, the fund’s assets have been completely and irreversibly •
converted to debt portfolio, pursuant to the Warranty formula (Probably due to uncertain
market conditions). Debt securities have a maturity that is nearly equal to the period
remaining in the warranty period.
Effective 30 June 2009, the fund has entered into a Financial Warranty Agreement •
whereby the “Warranty provider: Main Place LLC” issued a financial guarantee to the
fund, under certain conditions. For instance, the fund should satisfy the conditions of
the warranty agreement including the application of the “Warranty Formula”.

Post Warranty Period:
After the maturity date (end of warranty period), one may redeem his shares or keep •
them invested within the fund. During the post warranty period, the fund may invest its
assets in shares of the underlying fund (Oppenheimer Main street fund: a mutual fund
that invests in common US stocks)1.

Financial institution:	  The fund
is established by Oppenheimer
Funds, Inc, an asset management
company.
Inception date:	  7th October 2004.
Investment Objective:	  During the
warranty period, the fund will seek
capital preservation in order to
have a net asset value of at least
equal to the warranty amount. The
fund seeks high total return as a
second objective.
Type of assets: 	 Bonds, Effective
12th January 2009 fund’s assets
have been completely and
irreversibly converted to debt
portfolio.

85Capital Protected Funds Survey

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le

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31

A
 v

ar
ia

ti
on

 o
f C

PP
I:

a)
 A

ss
et

 a
llo

ca
tio

n
va

ri
es

 d
ep

en
di

ng
 o

n
m

ar
ke

t
co

nd
iti

on
s.

b)
 A

s
fr

om
 1

2th
 Ja

nu
ar

y
20

09
 th

e
fu

nd

co
nv

er
te

d
al

l i
ts

 a
ss

et
s

to
 b

on
ds

.
A

dd
iti

on
al

 p
ro

te
cti

on
:

Th
e

fu
nd

 e
nt

er
ed

 in
to

 a
 “

fin
an

ci
al

 w
ar

ra
nt

y”

w
ith

 a
 th

ird
 p

ar
ty

: M
ai

n
Pl

ac
e

LL
C.

Th
e

N
AV

 o
f t

he

•
un

de
rl

yi
ng

 fu
nd

s
is

ca

lc
ul

at
ed

 b
as

ed
 o

n
fo

rw
ar

d
pr

ic
in

g.

Th
e

fu
nd

 c
al

cu
la

te
s

•
th

e
N

AV
 a

s
of

 th
e

cl
os

e
of

 N
YS

E.

Ye
s

86 Capital Protected Funds Survey

1 Prospectus: https://janus.onlineprospectus.net/janus/MOB_library/MOB_data/LIB_SummaryProspectus/
STAT!5fProtected_Series-Growth!5fACSIT/STAT!5fProtected_Series-Growth!5fACSIT.pdf

Janus Protected Series - Growth A

Investment strategy 

Protected NAV•  is the protection feature
of the fund and is calculated at 80% of
the highest previously achieved NAV
per share class, reduced for dividends,
distributions, extraordinary expenses
and certain extraordinary items. The
fund is designed in such a way that the
NAV, excluding adjustments, will not fall
below the protected NAV. If the effective
NAV per share is less than the protected
NAV, the fund would liquidate. Other
funds call it the dynamic protection
floor.
Protection Component•  is the portion of
Janus protected series — Growth that
consists of cash, cash equivalents and
U.S. treasuries less the net notional value
of short equity index futures.
Equity Component • is the portion of Janus protected series — Growth that consists of
the market value of equity securities and options plus the net notional value of equity
index futures.

Protection strategy: A variation of CPPI
When markets are risingo

A larger percentage of the Fund holdings may be moved into the Equity Component (up •
to 100%) to capture some portion of the growth potential. Because of the reallocation
process, the Fund’s performance may lag the market in a market upturn.
The NAV is also likely to rise. Each time the NAV reaches a new high price, the Protected •
NAV locks in at 80% of the higher level

In falling marketso

The portfolio Manager has the flexibility to move money into the protection component •
(e.g., cash and U.S. treasuries—up to 100% of the portfolio) to help preserve the NAV.
During a downturn, the NAV is also likely to decline. However, by design the NAV should •
stay above the protected NAV, hence there is a level of protection for the investment.

Additional protection strategy:
 In order to maintain this protection, the fund has entered into a capital protection •
agreement with BNP Paribas Prime Brokerage Inc., a U.S. registered broker-dealer (the
“capital protection provider”) with protection backed by BNP Paribas, to provide capital
protection to the fund. The capital protection agreement currently covers outstanding
shares of each class of shares offered by the fund having an aggregate protected NAV
(the “aggregate protected amount”) of up to $1.5 billion. If the current NAV is below
the protected NAV when shares are redeemed, the protection provider will pay the
necessary amount to the fund to reach the protection level.1

Financial institution:	  The fund
is established by Janus Capital
Group.
Inception date:	  4th May 2011.
Investment Objective:	  Allows
investors to participate in the
stock market – and the growth it
potentially offers – while seeking
to cap downside losses at up to
20%?.
Type of assets:	  Equity.

87Capital Protected Funds Survey

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Fu
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bs

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ip

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Va
lu

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Ja
nu

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Pr

ot
ec

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Se
ri

es
 -

G
ro

w
th

 A

Eq
ui

ty
:

Ri
sk

y
as

se
ts

: E
qu

ity

se
cu

ri
tie

s
an

d
op

tio
ns

.
Sa

fe
 a

ss
et

s:
 C

as
h,

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as

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eq

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va

le
nt

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an

d
U

.S
.

tr
ea

su
ri

es

O
pe

n-
en

de
d

N
um

be
r

of
 u

ni
ts

:
Cr

ea
te

d:
 4

,0
74

Ca
nc

el
le

d:
 1

74
1

(s
ee

 n
ot

e1
)

A
 v

ar
ia

ti
on

 o
f C

PP
I:

a)
 A

ss
et

 a
llo

ca
tio

n
va

ri
es

 d
ep

en
di

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 o

n
m

ar
ke

t c
on

di
tio

ns
.

b)
 T

he
 p

ro
te

cti
on

 fl
oo

r
is

 d
yn

am
ic

 d
ue

 to

th
e

“p
ro

te
ct

ed
 N

AV
”.

A
dd

iti
on

al
 p

ro
te

cti
on

:
Th

e
fu

nd
 e

nt
er

ed
 in

to
 a

 “
ca

pi
ta

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ro

te
cti

on

ag
re

em
en

t”
 w

ith
 a

 th
ird

 p
ar

ty
 -

BN
P

Pa
ri

ba
s.

Th
e

N
AV

 o
f t

he

•
un

de
rl

yi
ng

 fu
nd

s
is

ca

lc
ul

at
ed

 b
as

ed
 o

n
fo

rw
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pr

ic
in

g.

Th
e

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nd

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•
th

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N

AV
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 th
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 N
YS

E.

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ot

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1


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th
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nu
m

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r

of
 S

ta
nd

ar
d

un
its

 c
re

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ed

 o
r

ca
nc

el
ed

 a
s

of
 3

0
•

th
 S

ep
te

m
be

r
20

11
 a

s
:

N
um

be
r

of
 u

ni
ts

 c
re

at
ed

: v
al

ue
 u

ni
ts

 s
ol

d
du

ri
ng

 th
e

pe
ri

od
/

N
AV

 p
er

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ha

re
($

)=
 3

5,
08

2/
 8

.6
1=

 4
 0

74
o

N
um

be
r

of
 u

ni
ts

 c
an

ce
lle

d:
 v

al
ue

 u
ni

ts
 re

de
em

ed
 d

ur
in

g
th

e
pe

ri
od

/
N

AV
 p

er
 s

ha
re

($
)=

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49

5/
 8

.6
1=

 1
74

o

88 Capital Protected Funds Survey

1 Fund fact sheet:
http://www.nbc.ca/bnc/files/bncfunds/en/2/852.pdf
2 Annual management report of fund management:
http://www.nbc.ca/bnc/files/bnc10034/en/2/852.pdf
3 Annual information form:
http://www.nbc.ca/bnc/files/bncpdf/en/2/notice_annuelle_2008_en.pdf

National Bank Protected Growth Balanced Fund

Investment strategy 

The fund invests primarily in a combination •
of term deposits, money market instrument,
mortgage loans guaranteed, government
bonds and debentures, and shares of
Canadian and foreign corporations1.

Protection strategy:
The fund has recourse to CPPI, depending on •
market conditions.

Additional protection:
The fund guarantees additional protection •
by using derivatives to hedge its portfolio
exposures2.
The second protection layer is the one •
insured by the National Bank Life Insurance
Company, the insurance company that
guarantees the value of the National Bank
Protected Fund units3.

Financial institution:	  The fund is
managed by Natcan Investment
Management.
Inception date:	  20th January 1998.
Investment Objective:	  The
Fund’s objectives are to provide
investment diversification, high
income and long-term capital
growth.
Type of assets:	  Mixed assets.

89Capital Protected Funds Survey

1  A
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Ty

pe
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fu

nd

Su
bs

cr
ip

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 F

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ot

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ch
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lu

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co

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 tr

ad
in

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ati

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an

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Pr

ot
ec

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ro

w
th

Ba

la
nc

ed
 F

un
d

M
ix

ed
 a

ss
et

s:
Sa

fe
 a

ss
et

s:
 T

er
m

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po
si

ts
, m

on
ey

 m
ar

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t

in
st

ru
m

en
ts

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ag

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lo

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s

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ar

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te

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,

go
ve

rn
m

en
t b

on
ds

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nd

de

be
nt

ur
es

.
Ri

sk
y

as
se

ts
: F

or
ei

gn

an
d

Ca
na

di
an

 e
qu

ity

(m
or

e
th

an
 5

0%
)

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os

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si
nc

e
M

ar
ch

31

, 2
00

5

N
um

be
r

of
 u

ni
ts

:
Cr

ea
te

d:
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Ca
nc

el
le

d:
16

2,
65

6
(s

ee
 n

ot
e1

)

A
 v

ar
ia

ti
on

 o
f C

PP
I:

Ch
an

ge
 p

or
tf

ol
io

 c
om

po
si

tio
n

de
pe

nd
in

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on

M

ar
ke

t c
on

di
tio

ns
.

A
dd

iti
on

al
 P

ro
te

cti
on

:
a)

 A
dd

iti
on

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 la

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r

of
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on

 is
 in

pl

ac
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by
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si
ng

 d
er

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ve
s

fo
r

he
dg

in
g

b)
 M

or
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r,

an
 in

su
ra

nc
e

co
m

pa
ny

 is

ap
po

in
te

d
to

 p
ro

te
ct

 th
e

in
iti

al
 c

ap
ita

l.

Th
e

N
AV

 o
f t

he
 fu

nd

•
is

 c
al

cu
la

te
d

ba
se

d
on

fo

rw
ar

d
pr

ic
in

g.

Th
e

N
AV

 is
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st
ab

lis
he

d
•

at
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pm
 o

n
th

e
w

or
ki

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da
ys

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on

to
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to
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Ex

ch
an

ge
.

N
/A

N
ot

e
1


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e
ca

lc
ul

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e

th
e

nu
m

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r

of
 S

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nd

ar
d

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its

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an

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le

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as

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f 3

1
•

th
 D

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em

be
r

20
10

 a
s1 :

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um

be
r

of
 u

ni
ts

 c
an

ce
lle

d:
 v

al
ue

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ni

ts
 re

de
em

ed
 d

ur
in

g
th

e
pe

ri
od

/
N

AV
 p

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re

($
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,8

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90 Capital Protected Funds Survey

1 Prospectus:
http://quote.morningstar.com/fund-filing/Prospectus/2009/1/30/t.aspx?t=&ft=&d=0fe17a55b12d40a3

Covington Venture Cap Protected Sr IX

Investment strategy

The Fund intends to invest primarily in •
emerging, high-growth, companies in Ontario.
It insists on investment diversification by
ensuring a balanced exposure to a variety
of sectors (the funds limits its investment
to 35% of any single industry). Besides,
it intends to develop and grow investee
businesses in cooperation with strategic
relationships introduced by Covington
Capital Corporation.

Protection strategy:
Investments will be structured primarily as •
equity in addition to convertible debt.
To achieve the objective of preserving and •
returning an investor’s initial subscription
price of shares, the Fund will subscribe to
Zero-Coupon Bonds and/or Qualifying Bonds
having an aggregate payment obligation at
the capital repayment date equal to the full amount of the subscription price paid by
those shareholders. (Approximately 70% of the net proceeds of the initial offering).
The other part of the initial capital will be invested in eligible investments of eligible •
businesses or reserves within the meaning of those terms in the Federal Tax Act and the
Ontario Act1.

Financial institution:	  The fund is
managed by Covington Capital.
Inception date:	  13th November
2007.
Investment Objective: 	 (i) To realize
long-term capital appreciation
on all or part of its investment
portfolio by investing in small
to medium sized privately held
enterprises based in Ontario.  (ii)
On the remainder of its investment
portfolio, to preserve and return
an investor’s initial subscription
price paid for the fund’s shares.
Type of assets:	  Equity.

91Capital Protected Funds Survey

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Eq
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:

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fe

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s:

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.

Ri
sk

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as

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: S
ha

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s

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O
nt

ar
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ig

h
gr

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th

co

m
pa

ni
es

.

Li
m

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d1

N
um

be
r

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ni
ts

:
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d:
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Ca
nc

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ill

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ve

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1

76
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o

92 Capital Protected Funds Survey

1 Prospectus:
https://www.brasil.citibank.com/JPS/content/pdf/Prosp_%20IBOV_Cap_Proteg_II.pdf

Citifirst Ibovespa Capital Protegido II FI Mult

Investment strategy

The FUND adopts strategies based on •
derivatives to protect the initial capital
and / or get a percentage of the IBOVESPA
(the index).
The operations will start on January 28, •
2010 (“HOME STRATEGYDATE “) and end
on July 28, 2011 (“EXPIRATION DATE OF THE
STRATEGY “). The duration between the Start
Date and End Date of the STRATEGY, is
defined as “TERM STRATEGY.”

Protection strategy: (A variation of bond and
call structure)

The fund allocates a portion of its portfolio •
to fixed income assets: Government bonds,
issued by National Treasury and / or the
Central Bank of Brazil, Derivative contracts
and Repo operations backed by government
securities. Bonds and derivatives should
mature by the Termination Date of the Strategy, and the projected value of the fixed
assets plus their yield should be equivalent to the value of initial assets of the FUND.
Another portion of the portfolio is allocated to options on IBOVESPA, where the •
maturity date is the Termination Date of the Strategy. The expected return is linked to
IBOVESPA.1

Financial institution:	  The fund is
managed by Citibank Distribuidora
de T’tulos e Valores Mobiliários
S.A.(CITIBANK DISTRIBUTOR OF
SECURITIES).
Inception date:	  18th January 2010.
Investment Objective:	  To achieve
a proportional gain in the Bovespa
Index “IBOVESPA” while protecting
the initial investment.
Type of assets:	  Equity.

93Capital Protected Funds Survey

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ch
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lu

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et

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ad
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ca

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Eq
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ty
:

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sk

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as

se
ts

: O
pti

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s

lin
ke

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to

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SP

A

in
de

x.
Sa

fe
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ss
et

s:
 G

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en

t
se

cu
ri

tie
s

an
d

fix
ed

in

co
m

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de

ri
va

tiv
es

.

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pe

n-
en

de
d

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/A

(A
nn

ua
l r

ep
or

t n
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av

ai
la

bl
e)

A
 v

ar
ia

ti
on

 o
f B

on
d

+
Ca

ll
O

pti
on

 :
a)

 In
ve

sti
ng

 in
 s

af
e

as
se

ts
 s

o
th

at
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ei
r

fin
al

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al

ue
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lu
s

th
e

yi
el

d
is

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qu

iv
al

en
t

to
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va

lu
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al

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nd

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ss

et
s.

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ve
sti

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 li

nk
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de

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ng

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nd

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94 Capital Protected Funds Survey

1 Prospectus: https://wwwss.shopinvest.com.br/infofundos/ConsultaInformativo.do?site=VAREJO&codigoFundo=31
&cnpjFundo=null&codigoTipoDocumento=10

Bradesco FI Mult Principal Protegido

Investment strategy

The Fund will allocate its assets in public and •
private fixed-income securities while also
seeking positions in equity and fixed-income
derivatives.
The fund may limit its exposure to derivatives •
and modify its asset allocation if market
conditions are not favorable, the exposure
could be 0% of total assets.
Similarly, the fund can modify the allocation •
to fixed income assets depending on credit
risk rating, political matters… The percentage
can be reduced to 0%.
The protection technique is a combination •
of “Dynamic asset allocation” and “Bond &
Call option technique”.

Protection strategy:
The fund invests in fixed income securities, •
after 63 days the funds allocate the yielded
interest in options linked to BOVESPA index.
In rising markets, the options may be exercised and the fund will receive a percentage •
of the variation IBOVESPA positive return in the period of 63 days.
In falling markets, these options lose their value but the invested capital will •
be maintained.1

Financial institution:	  The fund is
managed by Banco Bradesco S.A.
(Bradesco Bank).
Inception date:	  15th August 1997.
Investment Objective:	  The Fund’s
objective is to achieve capital
growth while protecting the
principal.
Type of assets:	  Bond.

95Capital Protected Funds Survey

Pr
ofi

le
 s

um
m

ar
y



Fu
nd

 n
am

e
Ty

pe
 o

f a
ss

et
Ty

pe
 o

f
fu

nd

Su
bs

cr
ip

ti
on

/
Re

de
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pti
on

 F

re
qu

en
cy

Pr
ot

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ti

on
 te

ch
ni

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e

Va
lu

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on

 M
et

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Se
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nd
ar

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 tr

ad
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Br
ad

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co

 F
I

M
ul

t
Pr

in
ci

pa
l

Pr
ot

eg
id

o

Bo
nd

:
Ri

sk
y

as
se

ts
: O

pti
on

s
lin

ke
d

to
 IB

O
VE

SP
A

in

de
x.

Sa
fe

 a
ss

et
s:

 P
ub

lic
/

pr
iv

at
e

fix
ed

 in
co

m
e

se
cu

ri
tie

s
an

d
fix

ed

in
co

m
e

de
ri

va
tiv

es
.

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pe

n-
en

de
d

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/A

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on
ds

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nd

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al

l +
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yn
am

ic
 a

ss
et

al

lo
ca

ti
on

:
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ft

er
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3
da

ys
 o

f i
nv

es
tm

en
t i

n
fix

ed

in
co

m
e

se
cu

ri
tie

s,
 th

e
yi

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d

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 in

ve
st

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lin

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SP
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 e

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ld

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lli

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ar
ke

ts
.

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e

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nd

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96 Capital Protected Funds Survey

1 Prospectus:
http://www.svs.cl/sitio/inc/reglamento/reg_int_ffmm.php?run_ffmm=8369

Larrainvial Proteccion APV-A

Investment strategy 

Protection strategy
The fund invests in fixed income securities •
(private or public) and in equity. The fund
does not exclude international investments.
The asset allocation is dynamic depending •
on market condition. In very volatile markets
equity can be reduced to 0% of total assets.
Similarly, debt instruments can be as low
as 0% depending on market behavior. For
the moment, the fund opts for limited risk,
since 80% of its portfolio is invested in debt
instruments.

Additional protection:
In order to hedge the risk related to its •
investment in bonds and equity, the fund
has recourse to derivatives. However, limits
are set for these types of operations. For
instance, the value of option premium should not exceed 5% of the asset value of the
fund.1

Financial institution:	  The fund
is managed by LARRAIN VIAL
ADMINISTRADORA GENERAL DE
FONDOS S.A
Inception date:	  15th July 2005.
Investment Objective:	  The Fund’s
objective is capital appreciation.
The Fund invests in fixed income
securities and Equity. Additionally,
the fund may invest in derivative
instruments.
Type of assets:	  Mixed assets.

97Capital Protected Funds Survey

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am

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Ty

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Ty

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Su
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cr
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sk
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t:
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.
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ss
et

s:
 P

ub
lic

/
pr

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at

e
fix

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 in

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se

cu
ri

tie
s,

 c
as

h.

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pe

n-
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ly
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be
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n

eq
ui

ty
 a

nd
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eb
t i

ns
tr

um
en

t d
ep

en
di

ng
 o

n
m

ar
ke

t c
on

di
tio

ns
.

A
dd

iti
on

al
 p

ro
te

cti
on

:
D

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iv

ati
ve

s
ar

e
us

ed
 to

 h
ed

ge
 fr

om
 p

or
tf

ol
io

in

ve
st

m
en

ts
.

Th
e

N
AV

 o
f t

he
 fu

nd

•
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98 Capital Protected Funds Survey

1 Sources:
Prospectus:
http://www.fondosmexicanos.com/administracion/informacion/prospectos/STGAR-1.pdf
Fund profile:
http://finance.yahoo.com/q/pr?s=STGAR1B1.MX+Profile

Fondo Santander Inversion de Renta
Variable STGAR-1 B1

Investment strategy

The Fund has a short-term investment •
horizon (less than or equal to one year). The
recommended period for the investor to get
capital protection and optimal results from
the investment strategy is one year.

Protection strategy
Protection is ensured by the types of the •
selected assets.
The Fund is of moderate risk as it invests •
primarily in debt securities from government
and banks ,  domestic  and/or  fore ign
denominated in local currency. The fund may
invest up to 100% of the total assets of the
Fund in Structured Notes. The classification
of the securities in which the Fund invests
must be located mainly within the first 2
levels granted by any rating agency, (Example: AA or AAA).
The fund may complement its fixed rate securities with zero coupon, variable rate •
securities or equities, but these should not exceed 20% of total assets.

Additional protection
The Fund may engage in derivatives to hedge its transactions. Derivatives are used both •
on exchanges and in OTC markets.
The main risk to hedge is the credit risk, given that the debt assets are exposed to total •
or partial failure of payment by the issuer of the securities, as they are sensitive to
movements in interest rates1.

Financial institution:	  The fund is
managed by GestiónSantander
S.A belonging to Grupo Financiero
Santander.
Inception date:	  2nd February 2010.
Investment Objective:	  The Fund’s
objective is to protect at least 90%
of initial capital and will seek to
offer additional return.
Type of assets:	  Bond.

99Capital Protected Funds Survey

Pr
ofi

le
 s

um
m

ar
y



Fu
nd

 n
am

e
Ty

pe
 o

f a
ss

et
Ty

pe
 o

f
fu

nd

Su
bs

cr
ip

ti
on

/
Re

de
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on

 F

re
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en
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ot

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ti

on
 te

ch
ni

qu
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Va
lu

ati
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et

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de
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ve

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io

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de

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en

ta

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ab
le

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TG

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1
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Eq
ui

ty
:

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sk

y
as

se
ts

: V
ar

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bl

e
in

te
re

st
 ra

te
 b

on
ds

 a
nd

eq

ui
tie

s
(le

ss
 th

an
 2

0%
).

Sa
fe

 a
ss

et
s:

 H
ig

hl
y

ra
te

d
fix

ed
 in

co
m

e
se

cu
ri

tie
s.

O
pe

n-
en

de
d

N
/A

(A
nn

ua
l r

ep
or

t n
ot

av

ai
la

bl
e)

In
ve

sti
ng

 in
 s

af
e

as
se

ts
In

ve
sti

ng
 in

 s
af

e
as

se
ts

 m
ai

nl
y

fix
ed

 in
co

m
e

se
cu

ri
tie

s
w

ith
 A

A
 a

nd
 A

A
A

 ra
tin

g.
A

dd
iti

on
 p

ro
te

cti
on

A
dd

iti
on

al
 la

ye
r

of
 p

ro
te

cti
on

 is
 in

 p
la

ce
 b

y
he

dg
in

g
th

e
cr

ed
it

ri
sk

 w
ith

 d
er

iv
ati

ve
s.

Th
e

N
AV

 o
f t

he
 fu

nd

•
is

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te
d

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d
on

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Ye
s

100 Capital Protected Funds Survey

1 Sources:
Prospectus:
http://www.fondosmexicanos.com/administracion/informacion/prospectos/TRIPLE1.pdf
General information:
http://www.bloomberg.com/quote/TRIPL1GB:MM

Fondo BBVA Bancomer Estructurado
Inversion TRIPLE1 GB

Investment strategy

To achieve its objective, the fund invests in •
fixed-income debt assets, mainly structured
notes and banks’ term deposits that are
rated AAA or AA by local rating agencies. The
portion of these assets should not be less
than 90%, as mentioned in the prospectus.
Investors should remain in the fund for •
a minimum period of 90 days (Warranty
period) to benefit from capital protection
and investment gains.
TRIPLE1 has a low investment risk, if any; it •
will be mainly associated with credit risk and
to a lesser extent, with the risk of abrupt
fluctuations in the interest rates.

Protection strategy
Capital protection is ensured by the nature of •
the selected assets. These are fixed-income
securities, highly rated, highly liquid, with a short term investment period (at least 2
months) and the structured bank notes should be capital protected.

Additional protection
TRIPLE1 may also invest in derivative financial instruments to hedge the portfolio •
related risks. Derivatives operations can be used both in the OTC or the exchange market.
However, the portion of these instruments must not exceed 10% of total assets.1

Financial institution:	  The fund
is managed by BBVA Bancomer
Gestión, S.A.
Inception date:	  3rd January 2008.
Investment Objective:	  The Fund’s
objective is to ensure a 100%
protection of the invested capital
as it provides the possibility of
earning additional gains.
Type of assets:	  Bond.

101Capital Protected Funds Survey

Pr
ofi

le
 s

um
m

ar
y



Fu
nd

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am

e
Ty

pe
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f a
ss

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 M

ai
nl

y
st

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ct

ur
ed

 n
ot

es
 a

nd

te
rm

 d
ep

os
its

.

O
pe

n-
en

de
d

N
/A

(A
nn

ua
l r

ep
or

t n
ot

av

ai
la

bl
e)

In
ve

sti
ng

 in
 s

af
e

as
se

ts
:

In
ve

sti
ng

 in
 s

af
e

as
se

ts
 m

ai
nl

y
fix

ed
 in

co
m

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se

cu
ri

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s

w
ith

 A
A

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nd

 A
A

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 p

ro
te

cti
on

:
A

dd
iti

on
al

 la
ye

r
of

 p
ro

te
cti

on
 is

 in
 p

la
ce

 b
y

he
dg

in
g

cr
ed

it
ri

sk
 a

nd
 in

te
re

st
 ra

te
 r

is
k

w
ith

de

ri
va

tiv
es

.

Th
e

N
AV

 o
f t

he
 fu

nd

•
is

 c
al

cu
la

te
d

ba
se

d
on

fo

rw
ar

d
pr

ic
in

g.

Ye
s

102 Capital Protected Funds Survey

Su
m

m
ar

y
of

 A
m

er
ic

a
ca

pi
ta

l p
ro

te
ct

ed
 f

un
ds

 s
ur

ve
y

c.
 Fu

nd
’s

 n
am

e
Ty

pe
 o

f a
ss

et
Ty

pe
 o

f
fu

nd

Su
bs

cr
ip

ti
on

/
Re

de
m

pti
on

Fr

eq
ue

nc
y

Pr
ot

ec
ti

on
 te

ch
ni

qu
e

Va
lu

ati
on

 M
et

ho
d*

Se
co

nd
ar

y
 tr

ad
in

g

USA

LV
IP

 P
ro

te
ct

ed

Pr
ofi

le
 2

01
0

Fu
nd

; S
ta

nd
ar

d
Cl

as
s

M
ix

ed
 a

ss
et

s:
Ri

sk
y

as
se

ts
: I

nd
ex

fu

nd
s

in
ve

sti
ng

 in
 e

qu
ity

Sa

fe
 a

ss
et

s:
 In

de
x

fu
nd

s
in

ve
sti

ng
 in

 fi
xe

d
in

co
m

es
 s

ec
ur

iti
es

, a
nd

hi

gh
 s

ho
rt

 te
rm

 m
on

ey

m
ar

ke
t i

nv
es

tm
en

ts
.

O
pe

n-
en

de
d

N
um

be
r

of

un
its

:
Cr

ea
te

d:
 8

69
Ca

nc
el

le
d:

 4
82

A
 v

ar
ia

ti
on

 o
f C

PP
I:

a)
 A

ss
et

 a
llo

ca
tio

n
va

ri
es

 d
ep

en
di

ng
 o

n
m

ar
ke

t c
on

di
tio

ns
.

b)
 A

ss
et

 a
llo

ca
tio

n
be

co
m

es
 m

or
e

co
ns

er
va

tiv
e

w
he

n
th

e
fu

nd

ap
pr

oa
ch

es
 m

at
ur

ity
, t

he
 la

nd
in

g
da

te
 2

03
0.

Su
b

pr
ot

ec
ti

on
 te

ch
ni

qu
e:

a)
 D

er
iv

ati
ve

s
ar

e
al

so
 u

se
d

fo
r

he
dg

in
g

pu
rp

os
es

: c
ro

ss
 c

ur
re

nc
y

de
ri

va
tiv

es
.

b)
 T

he
y

ar
e

al
so

 u
se

d
fo

r
Ta

cti
ca

l a
ss

et

al
lo

ca
tio

n:
 c

os
t r

ed
uc

tio
n.

D
ue

 to
 it

s
‘fu

nd
 o

f f
un

ds
’

•
st

ru
ct

ur
e,

 th
e

Pr
ofi

le

Fu
nd

’s
 N

AV
 is

 c
al

cu
la

te
d

ba
se

d
pr

in
ci

pa
lly

 o
n

th
e

N
AV

s
of

 th
e

sh
ar

es
 o

f t
he

un

de
rl

yi
ng

 m
ut

ua
l f

un
ds

in

 w
hi

ch
 th

e
Fu

nd
 in

ve
st

s.

Th
e

N
AV

 o
f t

he
 u

nd
er

ly
in

g
•

fu
nd

s
is

 c
al

cu
la

te
d

ba
se

d
on

 fo
rw

ar
d

pr
ic

in
g.

N
o

USA

LV
IP

 P
ro

te
ct

ed

Pr
ofi

le
 2

01
0

Fu
nd

; S
er

vi
ce

Cl

as
s

N
um

be
r

of

un
its

:
Cr

ea
te

d:
 1

85
Ca

nc
el

le
d:

 2
90

USA

O
pp

en
he

im
er

Pr

in
ci

pa
l P

ro
t

M
ai

n
St

re
et

Fu

nd
 II

I;A

Bo
nd

s:
Sa

fe
 a

ss
et

s:
 1

00
%

 U
S

go
ve

rn
m

en
t o

bl
ig

ati
on

fr

om
 1

2t
h

Ja
nu

ar
y

20
09

an

d
on

w
ar

d.

Cl
os

ed

N
um

be
r

of

un
its

:
Cr

ea
te

d:
 9

,1
41

Ca
nc

el
le

d:

12
0,

26
3

A
 v

ar
ia

ti
on

 o
f C

PP
I:

a)
 A

ss
et

 a
llo

ca
tio

n
va

ri
es

 d
ep

en
di

ng
 o

n
m

ar
ke

t c
on

di
tio

ns
.

b)
 A

s
fr

om
 th

e
12

th
 Ja

nu
ar

y
20

09

th
e

fu
nd

 c
on

ve
rt

ed
 a

ll
its

 a
ss

et
s

to

bo
nd

s.

A
dd

iti
on

al
 p

ro
te

cti
on

:
Th

e
fu

nd
 e

nt
er

ed
 in

to
 a

 “
fin

an
ci

al
 w

ar
ra

nt
y”

w

ith
 a

 th
ird

 p
ar

ty
 M

ai
n

Pl
ac

e
LL

C.

Th
e

N
AV

 o
f t

he
 u

nd
er

ly
in

g
•

fu
nd

s
is

 c
al

cu
la

te
d

ba
se

d
on

 fo
rw

ar
d

pr
ic

in
g.

Th

e
fu

nd
 c

al
cu

la
te

s
th

e
•

N
AV

 a
s

of
 th

e
cl

os
e

of

N
YS

E.

Ye
s

103Capital Protected Funds Survey

USA

Ja
nu

s
Pr

ot
ec

te
d

Se
ri

es
 -

G
ro

w
th

A

Eq
ui

ty
:

Ri
sk

y
as

se
ts

: E
qu

ity

se
cu

ri
tie

s
an

d
op

tio
ns

.
Sa

fe
 a

ss
et

s:
 C

as
h,

 c
as

h
eq

ui
va

le
nt

s
an

d
U

.S
.

tr
ea

su
ri

es
.

O
pe

n-
en

de
d

N
um

be
r

of

un
its

:
Cr

ea
te

d:
 4

,0
74

Ca
nc

el
le

d:
 1

74

A
 v

ar
ia

ti
on

 o
f C

PP
I:

a)
 A

ss
et

 a
llo

ca
tio

n
va

ri
es

 d
ep

en
di

ng
 o

n
m

ar
ke

t c
on

di
tio

ns
.

b)
 T

he
 p

ro
te

cti
on

 fl
oo

r
is

 d
yn

am
ic

 d
ue

to

 th
e

“p
ro

te
ct

ed
 N

AV
”.

A
dd

iti
on

al
 p

ro
te

cti
on

Th
e

fu
nd

 e
nt

er
ed

 in
to

 a
 “

ca
pi

ta
l p

ro
te

cti
on

ag

re
em

en
t”

 w
ith

 a
 th

ird
 p

ar
ty

 -
BN

P
Pa

ri
ba

s.

Th
e

N
AV

 o
f t

he
 u

nd
er

ly
in

g
•

fu
nd

s
is

 c
al

cu
la

te
d

ba
se

d
on

 fo
rw

ar
d

pr
ic

in
g.

Th

e
fu

nd
 c

al
cu

la
te

s
th

e
•

N
AV

 a
s

of
 th

e
cl

os
e

of

N
YS

E.

Ye
s

Canada

N
ati

on
al

 B
an

k
Pr

ot
ec

te
d

G
ro

w
th

Ba

la
nc

ed
 F

un
d

M
ix

ed
 a

ss
et

s:
Sa

fe
 a

ss
et

s:
 T

er
m

de

po
si

ts
, m

on
ey

 m
ar

ke
t

in
st

ru
m

en
ts

, m
or

tg
ag

e
lo

an
s

gu
ar

an
te

ed
,

go
ve

rn
m

en
t b

on
ds

 a
nd

de

be
nt

ur
es

.
Ri

sk
y

as
se

ts
: F

or
ei

gn

an
d

Ca
na

di
an

 e
qu

ity

(m
or

e
th

an
 5

0%
)

Cl
os

ed

Si
nc

e
M

ar
ch

31

, 2
00

5

N
um

be
r

of

un
its

:
Cr

ea
te

d:
 0

Ca
nc

el
le

d:
16

2,
65

6

A
 v

ar
ia

ti
on

 o
f C

PP
I:

Ch
an

ge
 p

or
tf

ol
io

 c
om

po
si

tio
n

de
pe

nd
in

g
on

M

ar
ke

t c
on

di
tio

ns
.

A
dd

iti
on

al
 p

ro
te

cti
on

a)
 A

dd
iti

on
al

 la
ye

r
of

 p
ro

te
cti

on
 is

in

 p
la

ce
 b

y
us

in
g

de
ri

va
tiv

es
 fo

r
he

dg
in

g.
b)

 B
es

id
es

, a
n

in
su

ra
nc

e
co

m
pa

ny

ap
po

in
te

d
to

 p
ro

te
ct

 th
e

in
iti

al

ca
pi

ta
l.

Th
e

N
AV

 o
f t

he
 fu

nd

•
is

 c
al

cu
la

te
d

ba
se

d
on

fo

rw
ar

d
pr

ic
in

g.

Th
e

N
AV

 is
 e

st
ab

lis
he

d
•

at
 4

pm
 o

n
th

e
w

or
ki

ng

da
ys

 o
f T

or
on

to
 S

to
ck

Ex

ch
an

ge
.

N
/A

Canada

Co
vi

ng
to

n
Ve

nt
ur

e
Ca

p
Pr

ot
ec

te
d

Sr
 IX

Eq
ui

ty
:

Sa
fe

 a
ss

et
s:

 Z
er

o-
Co

up
on

 B
on

ds
.

Ri
sk

y
as

se
ts

: S
ha

re
s

in

O
nt

ar
io

 h
ig

h
gr

ow
th

co

m
pa

ni
es

.

Li
m

ite
d

N
um

be
r

of

un
its

:
Cr

ea
te

d:
 0

Ca
nc

el
le

d:
12

0,
00

0

Bo
nd

 +
 E

qu
it

y
(s

im
ila

r
to

 B
on

d
+

Ca
ll

O
pti

on
):

a)
 A

bo
ut

 7
0%

 o
f t

he
 c

ap
ita

l i
s

in
ve

st
ed

in

 z
er

o
co

up
on

 b
on

ds
; s

o
th

at
 th

e
ag

gr
eg

at
e

pa
ym

en
t o

bl
ig

ati
on

 w
ill

 b
e

eq
ua

l t
o

th
e

ca
pi

ta
l i

nv
es

te
d.

b)
 T

he
 re

m
ai

ni
ng

 c
ap

ita
l p

or
tio

n
is

in

ve
st

ed
 in

 p
ri

va
te

 e
qu

ity
.

Th
e

N
AV

 o
f t

he
 fu

nd

•
is

 c
al

cu
la

te
d

ba
se

d
on

fo

rw
ar

d
pr

ic
in

g.

Th
e

Fu
nd

 h
as

 a
do

pt
ed

 a

•
m

et
ho

d
of

 v
al

ui
ng

 b
ot

h
th

e
in

ve
st

m
en

ts
 fo

r
w

hi
ch

a

pu
bl

is
he

d
m

ar
ke

t d
oe

s
no

t e
xi

st
.

A
n

an
nu

al
 v

al
ua

tio
n

by

•
an

 in
de

pe
nd

en
t a

ud
ito

r
is

re

qu
ire

d.

N
o

104 Capital Protected Funds Survey

Brazil

Ci
ti

fir
st

Ib

ov
es

pa
 C

ap
it

al

Pr
ot

eg
id

o
II

FI

M
ul

ti
m

er
ca

do

Eq
ui

ty
:

Ri
sk

y
as

se
ts

: O
pti

on
s

lin
ke

d
to

 IB
O

VE
SP

A

in
de

x.
Sa

fe
 a

ss
et

s:
 G

ov
er

nm
en

t
se

cu
ri

tie
s

an
d

fix
ed

in

co
m

e
de

ri
va

tiv
es

.

O
pe

n-
en

de
d

N
/A

(A
nn

ua
l r

ep
or

t
no

t a
va

ila
bl

e)

A
 v

ar
ia

ti
on

 o
f b

on
ds

 a
nd

 c
al

l :
a)

 In
ve

sti
ng

 in
 s

af
e

as
se

ts
 s

o
th

at

th
ei

r
fin

al
 v

al
ue

 p
lu

s
th

e
yi

el
d

is

eq
ui

va
le

nt
 to

 th
e

va
lu

e
of

 in
iti

al
 fu

nd

as
se

ts
.

b)
 In

ve
sti

ng
 in

 o
pti

on
 li

nk
ed

 to

IB
O

VE
SP

A
 to

 re
al

iz
e

a
re

tu
rn

 li
nk

ed

to
 th

e
in

de
x.

Th
e

N
AV

 o
f t

he
 u

nd
er

ly
in

g
•

fu
nd

s
is

 c
al

cu
la

te
d

ba
se

d
on

 fo
rw

ar
d

pr
ic

in
g.

Ye

s

Brazil

Br
ad

es
co

 F
I

M
ul

t P
ri

nc
ip

al

Pr
ot

eg
id

o

Bo
nd

:
Ri

sk
y

as
se

ts
: O

pti
on

s
lin

ke
d

to
 IB

O
VE

SP
A

in

de
x.

Sa
fe

 a
ss

et
s:

 P
ub

lic
/

pr
iv

at
e

fix
ed

 in
co

m
e

se
cu

ri
tie

s
an

d
fix

ed

in
co

m
e

de
ri

va
tiv

es
.

O
pe

n-
en

de
d

N
/A

(A
nn

ua
l r

ep
or

t
no

t a
va

ila
bl

e)

A
 v

ar
ia

ti
on

 o
f B

on
ds

 a
nd

 C
al

l +
 d

yn
am

ic

as
se

t a
llo

ca
ti

on
:

a)
 A

ft
er

 6
3

da
ys

 o
f i

nv
es

tm
en

t i
n

fix
ed

 in
co

m
e

se
cu

ri
tie

s,
 th

e
yi

el
d

is
 in

ve
st

ed
 in

 o
pti

on
s

lin
ke

d
to

IB

O
VE

SP
A

.
b)

 P
ar

tic
ip

ati
on

 in
 e

qu
ity

 s
ec

ur
iti

es

co
ul

d
be

 re
du

ce
d

to
 0

%
 in

 fa
lli

ng

m
ar

ke
ts

.

Th
e

N
AV

 o
f t

he
 fu

nd

•
is

 c
al

cu
la

te
d

ba
se

d
on

fo

rw
ar

d
pr

ic
in

g.

Ye
s

Chile

La
rr

ai
nv

ia
l

Pr
ot

ec
ci

on

A
PV

-A

M
ix

ed
 a

ss
et

:
Ri

sk
y

as
se

t:
 E

qu
ity

.
Sa

fe
 a

ss
et

s:
 P

ub
lic

/
pr

iv
at

e
fix

ed
 in

co
m

e
se

cu
ri

tie
s,

 c
as

h.

O
pe

n-
en

de
d

N
um

be
r

of

un
its

:
Cr

ea
te

d:

55
,2

16
,7

93
Ca

nc
el

le
d:

35

,7
51

,5
71

A
 v

ar
ia

ti
on

 o
f C

PP
I:

Po
rtf

ol
io

 is
 d

yn
am

ic
al

ly
 a

llo
ca

te
d

be
tw

ee
n

eq
ui

ty
 a

nd
 d

eb
t i

ns
tr

um
en

t d
ep

en
di

ng
 o

n
m

ar
ke

t c
on

di
tio

ns
.

A
dd

iti
on

al
 p

ro
te

cti
on

:
D

er
iv

ati
ve

s
ar

e
us

ed
 to

 h
ed

ge
 fr

om
 p

or
tf

ol
io

in

ve
st

m
en

ts
.

Th
e

N
AV

 o
f t

he
 fu

nd

•
is

 c
al

cu
la

te
d

ba
se

d
on

fo

rw
ar

d
pr

ic
in

g.

Ye
s

Mexico

Fo
nd

o
Sa

nt
an

de
r

In
ve

rs
io

n
de

Re

nt
a

Va
ri

ab
le

ST

G
A

R-
1

B1

Eq
ui

ty
:

Ri
sk

y
as

se
ts

: V
ar

ia
bl

e
in

te
re

st
 ra

te
 b

on
ds

 a
nd

eq

ui
tie

s
(le

ss
 th

an
 2

0%
).

Sa
fe

 a
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105Capital Protected Funds Survey

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106 Capital Protected Funds Survey

1 http://www.lipperleaders.com
2 Types of assets as suggested by Lipperleader are: Bonds, Equity and mixed assets.
3 http://www.invest.com.my:8080/personal/funds/screener/
4 http://www.sebi.gov.in/DeptIndex.jsp?dep_id=4
5 http://www.csrc.gov.cn/pub/csrc_en/participants/FundsRelatedList/ListofFunds/200906/t20090616_107657.htm

Survey of Asia Protected FundsIX.

Funds screening: Methodology1.
Capital protected funds are particularly active in Asia. Due to the economic boom of the •
emerging countries, more licenses are granted to investment funds including the capital
protected ones.
In our survey, we focus on the following countries: New Zealand, Australia, Japan, Korea, •
Singapore, Malaysia, Pakistan, India and China. The choice is dictated by the relevance of
the economic and the financial activities.
The funds were selected from different sources and by different means. For some •
countries, we refer to funds’ screeners or Databases. When it is not possible, we use the
internet to constitute our own protected funds selection. We try to establish a ranking
by country as far as possible, since it is difficult to establish a global ranking.
For • Australia and New Zealand: We referred to Lipper screener1. For all types of assets2,
we narrowed our scope on funds rated 4 and 5 in terms of total returns. The selection
contains a considerable number of protected fund but these are managed by a handful
of companies. To avoid repetitiveness due to similar management strategies through the
series of funds, we only took a sample of well-rated funds per Management Company
and per type of asset.
For • Japan: We referred to Lipper as well. We noticed that some companies monopolize
the top spots of protected funds’ ranking. Hence, we only picked a sample of their funds
in order to not be repetitive when it comes to the management strategy.
For • Korea: On Lipper Screener , we found only two protected funds that are rated 5 in
terms of total returns and that are domiciled in Korea.
For • Singapore: We narrowed our interest in highly rated funds and these are rated 5 for
bonds and 3 for mixed assets.
For • Malaysia: We referred to a local Fund Database3. The Database lists a number of
protected funds. To set a pre-selection for the survey, we shortlisted protected funds
with a high YTD return.
For • Pakistan: We could not find a proper fund database or fund screener. Thus, we had
recourse to the internet. We managed to set our own protected fund list for Pakistan.
This list is not meant to be comprehensive; it only contains the protected funds we could
find. For some funds, we are unable to mention the YTD return. This is because their
documentation (prospectus and annual report) are not available online. Consequently,
there is no need to consider them in the final selection.
For • India: Due to the lack of proper fund screeners, we visited the Securities Commission
of India’s website. There is this list of funds that have been granted licenses to operate
in the years 2010 and 2011, among which we found protected funds4. As in the case
of Pakistani protected funds, we are unable to mention the YTD of funds whose
documentation is not available online.
For • China: On the website of the Chinese Central Bank, we found the list of funds
operating in china, including the protected funds. The YTD is not given for these funds
simply because none of them attached any documentation on their websites, at least
not in English5.

107Capital Protected Funds Survey

1 For the funds that have been screened using www.lipperleaders.com, the data relative to “Total net assets” is that
of 30th March 2012.
2 For New Zealand, Australia, Japan, Korea and Singapore Lipper Rating, with regards to Total Returns, is that of
December 2011.
3 For Malaysia, the YTD returns of the selected protected funds are those of December 2011
4 http://hwangim.com/project/hwang/media/2012/03/12/185456-474.pdf Data are relative to 29th February 2012
5 For the remaining Malaysian funds, data related to “Total net assets” has been collected using http://
my.morningstar.com/ap/main1/default.aspx Data are relative to 31st of March 2012.
6 For Pakistan, the YTD returns of the selected protected funds are those of December 2011
7 When the Documentation is not available, it is impossible to get the rest of the information. That is what “X” refers to.
8 Financial statements of the half year & quarter ended December 2011. To be downloaded from the official website
http://www.faysalfunds.com/html/FSGF.html

Survey’s selection2.

Fund’s name Documents Performance
Type of
assets

Total net assets
(Currency of

denomination)1

Total net
assets
($ M)

New Zealand Liontamer FALLEN ANGELS Series1 (Trust 26)-Tracker Available 5 (lipper)2 Equity N/A N/A

New Zealand Liontamer FALLEN ANGELS Series1 (Trust 26)-Booster Available 5 (lipper) Equity N/A N/A

New Zealand Liontamer BRICK Series 1 (Trust 18)-Booster Available 5 (lipper) Bond N/A N/A

New Zealand Liontamer COMBI Series 3 (Trust 17)-Tracker Available 5 (lipper) Bond N/A N/A

New Zealand Westpac KiwiSaver-Capital Protection Plan 1 Available 5 (lipper) Mixed assets 9.51 M NZD 3.20

New Zealand Asteron Investment Bond Capital Protected Available 4 (lipper) Mixed assets 3.90 M NZD 7.80

Australia Invesco Wholesale Protected Growth Available 5 (lipper) Mixed assets 9.12 M AUD 9.61

Australia Macquarie Winton Global Opportunities Trust Available 5 (lipper) Mixed assets 31.92 M AUD 33.61

Australia Pre Select 100%+ Cap Protected Growth 1 Available 5 (lipper) Mixed assets N/A N/A

Australia Liontamer FALLEN ANGELS Series1 (Trust 26)-Booster Available 5 (lipper) Equity N/A N/A

Australia Liontamer FALLEN ANGELS Series1 (Trust 26)-Booster Available 5 (lipper) Equity N/A N/A

Australia STRIPES Global Financial Titans Available 5 (lipper) Equity N/A N/A

Australia Credit Suisse PL100-World Water Trust Available 4 (lipper) Equity 26.55 M AUD 27.96

Australia MQ Gateway Trust Class BH-Asian Cash Hoarders 100% Available 4 (lipper) Equity 1.090 M AUD 1.15

Australia OnePath OA Per Sup-SGAM Protected Alt NEF Available 4 (lipper) Equity N/A N/A

Australia Liontamer COMBI Series 3 (Trust 17)-Tracker Available 5 (lipper) Bond N/A N/A

Japan Schroder Index Linked Cap Prot US Eq 2007-03 Available 5 (lipper) Equity 25.54 M AUD 26.89

Japan Schroder Index Linked Cap Prot Indian Eq 2007-03 Available 5 (lipper) Equity 60.79 M AUD 64.01

Japan Platinum Trust-Look-Back RE Idx Linked(AUD Pri Pt) Available 4 (lipper) Equity 20.73 M AUD 21.83

Japan SPARX Principal Protected Asia Pac Diversified II Available 1 (lipper) Bond N/A N/A

Korea Dongbu Delta - Ace 1 Closed Equity Mixed 5-10 Available 5 (lipper) Mixed assets N/A N/A

Korea Dongbu Delta - Ace 1 Closed Equity Mixed 8 Available 5 (lipper) Mixed assets 1365 M KRW 1.21

Singapore Amundi Bonus Builder Available 3 (lipper) Mixed assets 29.74 M SGD 23.62

Singapore HSBC Turbo Double 8 Available 3 (lipper) Mixed assets 8.58 M USD 8.58

Singapore DBS Sprint Capital Protected Available 5 (lipper) Bond 21.53 M SGD 17.10

Singapore GreatLink Choice (Dec 2013) Available 5 (lipper) Bond 0. 008 M SGD 0.007

Malaysia3 HDBS Tactical Opportunity Capital Protected Available YTD -0.25% Bond 41.46 M RM4 13.616

Malaysia OSK-UOB Capital Protected Gold Guru Available YTD 5.23% Bond 3.08 M USD5 3.08

Malaysia OSK-UOB Capital Protected Asia Gaming & Hospitality Available YTD 0.32% Bond 14.74 M USD 14.74

Malaysia OSK-UOB CP China A-Share - Series 2 Available YTD 0.28% Bond 12.58 M USD 12.58

Malaysia RHB Dynamic Oil-Gold Capital Protected Available YTD 0.44% Bond 10.20 M USD 10.20

Malaysia RHB China Averaging Capital Protected Available YTD 0.31% Bond 17.16 M USD 17.16

Malaysia ING Principal Protected Income Fund Available YTD 0.17% Bond N/A  N/A

Malaysia PNB Structured Investment Available YTD 0.35% Mixed assets 876.09 M USD 876.09

108 Capital Protected Funds Survey

1 Annual report of the year ended 30th June 2011
http://www.igifunds.com.pk/assets/pdf/annual_report2011/AnnualAccounts-June-2011.pdf
2 Factsheet of March 2012 http://www.jsil.com/fmr.do?fundCode=22&pId=206
3 Factsheet of December 2011
http://www.kasb.com/sitedata/downloads/Funds/20120111010143335_FMR%20Dec%202011.pdf
4 Factsheet of December 2011 http://www.picicamc.com/portals/0/fmr%20dec2011.pdf
5 For India, The YTD returns of the selected protected funds are those of January 2012
6 Factsheet of December 2011 https://www.jpmorganmf.com/inec/en/Factsheet/1%20CPOF%20Dec2011.pdf
7 Factsheet of March 2012 http://www.valueresearchonline.com/funds/newsnapshot.asp?schemecode=12842
8 Factsheet of March 2012 http://funds.in.reuters.com/IN/funds/overview.asp?symbol=40339717&fund=Axis%20
Capital%20Protection%20Oriented%20Fund-Srs-1-Growth

Malaysia TA Select Titans In Asia Capital Protected Fund Available YTD -0.17% Bond 4.69 M USD 4.69

Pakistan6 Pakistan Capital Protected Fund-Fixed Income
Securities

N/A X7  X X  X

Pakistan Alfalah GHP Principal Protected Fund-II (AGPPF-II) N/A X  X X  X

Pakistan Faysal Savings Growth Fund Available YTD 11.22%  Bond 3,633 M PKR8 40

Pakistan IGI Capital Protected Fund (IGI-CPF) Commodity linked Available
Since
inception
0.64%

Mixed assets 830 M PKR1 9.14

Pakistan JS Principal Secure Fund I (JS PSF-I) Available YTD 5.2%  Bond
1,072 M

PKR2 11.80

Pakistan KASB Capital Protected Gold Fund Available YTD 3.87%  Bond 521 M PKR3 5.74

Pakistan PICIC Income Fund Available YTD 11.57%  Bond 1,079 M PKR4 11.88

Pakistan Alfalah GHP Principal Protected Fund-II (AGPPF-II) N/A X  X X  X

India5 SBI Capital Protection Oriented Fund - Series 1 Available 2 (lipper) Mixed assets 2,266 M INR 44.96

India Sundaram Capital Protection Oriented Fund 5 Years Available 2 (lipper) Mixed assets 84 M INR 1.67

India UTI Capital Protection Oriented Sch-I 5 Years-Div N/A 4 (lipper) Mixed assets N/A   X

India JPMorgan India Capital Protection Oriented Fund Available YTD 0.80% Mixed Assets 3,224 M INR6 63.97

India Pramerica Capital Protection Oriented Fund - Series 3 N/A X  X  X  X

India
Birla Sun Life Capital Protection Oriented Fund -
Series 1

Available
Since inception
4.60%

Mixed assets N/A  X

India Tata Capital Protection Oriented Fund - Series I and II N/A X  X X  X

India
L and T Capital Protection Oriented Fund - Series I,
II &III

N/A X  X
X

X

India
ICICI Prudential Capital Protection Oriented Fund
-Series I to V

Available YTD 1.73%  Bond 154 M INR7 3.06

India Axis Capital Protection Oriented Fund - Series 1 Available YTD 5.88%
Mixed
assets

1,778 M INR8
35.28

India
BNP Paribas Capital Protection Oriented Fund -
Series I, II&III

N/A X  X X  X

India Religare Capital Protection Oriented Fund - Series I Available YTD 2.02% Mixed Assets N/A  N/A

China
KBC-GOLDSTATE Jewel Dynamic Principal-
Protected Mixed Fund

N/A X  X X  X

China Yinhua Principal-Protected and Value-Added Fund N/A X  X X  X

China Yinhua Principal Protected Value Growth Fund N/A X  X X  X

China China Southern Principal Protected Fund N/A X  X X  X

China Guotai Jinlu Principal Preserved Value Growth Fund II N/A X  X X X

China Wanjia Principal Protected Appreciation Fund N/A X  X X X
*: N/A: Not Available - X: When the Documentation is not available, it is impossible to get the rest of the

information. That is what “X” refers to.

Table 16: Pre-selection of Asia Capital Protected Funds

109Capital Protected Funds Survey

Final selection3.
In the final selection, we considered the relevance of the economic activity of the hosting •
country, the performance of funds and the availability of funds’ documentation.
The number of funds to be scrutinized was finalized based on the relevance of the country •
and the number of funds we could collect. Hence, we kept four funds for Australia, four
for India, three for Malaysia, two for New Zealand, two for Singapore, two for Pakistan.
Though we collected a considerable number of protected funds in China, the lack of •
documentation, at least in English, prevented us from including them in the survey.
www.lipperleaders.co• m offers Preliminary information about capital protected funds in
Japan and Korea, yet we could not access their documentation in English. Hence, we
were forced to abandon further research for these two countries as well.
Australia• : We focused on the funds that are rated 5 by Lipper. “Liontamer FALLEN
ANGELS Series” is one of them, but since we cover the same fund in New Zealand, we
avoided the repetition.
New Zealand• : Liontamer funds always appear in the top of the ranking whether in New
Zealand or Australia. In order to not have the same management style, we decided to
take only one sample of the Liontamer protected funds series i.e. “Liontamer FALLEN
ANGELS Series1 (Trust 26)-Booster”. “Westpac KiwiSaver-Capital Protection Plan 1” is
the second fund that is scrutinized.
Singapore• : We shortlisted the best performing funds “DBS Sprint Capital Protected” and
“GreatLink Choice (Dec 2013)”.
Malaysia• : We referred to the YTD return to select the three most performing funds.
Hence we include “OSK-UOB Capital Protected Gold Guru”, “RHB Dynamic Oil-Gold
Capital Protected” and “PNB Structured Investment”.
Pakistan• : The choice is dictated by the availability of documentation and the highest
YTD returns. As a result, we include “Faysal Savings Growth Fund” and “KASB Capital
Protected Gold Fund”.
India• : As in the case of Pakistan, we excluded the funds whose documentation is not
available. Next, we considered the funds that are rated by Lipper, namely “Sundaram
Capital Protection Oriented Fund 5 Years” and “SBI Capital Protection Oriented Fund -
Series 1”. As a result, we include two funds with the highest YTD return i.e. “Birla Sun
Life Capital Protection Oriented Fund – Series1” and “Axis Capital Protection Oriented
Fund - Series 1”.

New Zealand Australia Singapore Malaysia Pakistan India

NAV Average 7.80 21.61 8.55 296.46 22.87 27.30

NAV Median 7.80 21.61 8.55 10.20 22.87 35.28

Number of Funds 2 4 2 3 2 4

U
SD

 M
ill

io
n

NAV Average NAV Median

0.00

50.00

100.00

150.00

200.00

250.00

300.00

350.00

A value of “0” means that the information was not available at the time of data collection.

Figure 11: Asia final selected capital protected funds aggregation

110 Capital Protected Funds Survey

http://www.lipperleaders.com

Fund’s name Performance Type of assets
Total net
assets*

New Zealand Liontamer FALLEN ANGELS Series1 (Trust 26)-Booster 5 (lipper) Equity N/A

New Zealand Westpac KiwiSaver-Capital Protection Plan 1 5 (lipper) Mixed Assets 9.51 M NZD

Australia Invesco Wholesale Protected Growth 5 (lipper) Mixed Assets 9.12 M AUD

Australia Macquarie Winton Global Opportunities Trust 5 (lipper) Mixed Assets 31.92 M AUD

Australia Pre Select 100%+ Cap Protected Growth 1 5 (lipper) Mixed Assets N/A

Australia STRIPES Global Financial Titans 5 (lipper) Equity N/A

Singapore DBS Sprint Capital Protected 5 (lipper) Bond 21.53 M SGD

Singapore GreatLink Choice (Dec 2013) 5 (lipper) Bond 0.008 M SGD

Malaysia OSK-UOB Capital Protected Gold Guru YTD 5.23% Bond 3.08 M USD

Malaysia RHB Dynamic Oil-Gold Capital Protected YTD 0.44% Bond 10.20 M USD

Malaysia PNB Structured Investment YTD 0.35% Mixed assets 876.09 M USD

Pakistan Faysal Savings Growth Fund YTD 11.22% Bond 3,633 M PKR

Pakistan KASB Capital Protected Gold Fund YTD 3.87% Bond 521 M PKR

India SBI Capital Protection Oriented Fund - Series 1 2 (lipper) Mixed Assets 2,266 M INR

India Sundaram Capital Protection Oriented Fund 5 Years 2 (lipper) Mixed Assets 84 M INR

India Birla Sun Life Capital Protection Oriented Fund - Series 1 Since inception 4.60% Mixed Assets N/A

India Axis Capital Protection Oriented Fund - Series 1 YTD 5.88% Mixed Assets 1,778 M INR

*: N/A: Not Available

Table 17: Final selection of Asia Capital Protected Funds

Capital protected funds activity is promising in Australia. It started early – the oldest
fund within the final selection was launched in 1993 – and it continues to grow and to develop
innovative products. The funds established before 2008 are of a longer tenure and capital
protection will not be enforceable until the maturity date, whereas the fund created in mid-2008
“STRIPES Global Financial Titans” is of a medium term. Globally, each fund has its own investment
style and the protection techniques are not redundant. The oldest fund- “Invesco Wholesale
Protected Growth” (1993) - has recourse to a very common approach, CPPI with an additional
layer of derivatives for hedging. “Macquarie Winton Global Opportunities Trust” on the other
hand, has a rather complex and unique investment strategy. The fund invests the proceeds in a
company that places its investments in a second company. This one, in turns, holds a portfolio of
securities that are managed according to the CPPI by the protection provider (Goldman Sachs)
who protects its investments by means of a capital protection agreement. Hence, the capital
protection exists but is not directly provided to the Trust or to the investors. The pace at which the
units are cancelled in these two funds is intriguing. For the year ended 2011, 2 771 000 Invesco
units were redeemed against 617 000 created. For Macquarie trust, 3 436 000 were cancelled
while the creation is nil. This could be explained by an eventual difficulty within the funds or by
the approaching maturity date, at least for the latter. “Pre Select 100%+ Cap Protected Growth
1” seems to use a common CPPI + derivatives strategy but its peculiar in that both the equity
and deposit components are managed by two subsidiaries of the mother company to which it
belongs. Finally, three funds out of four are closed and three out of four are not listed; this might
not say much but it might suggest liquidity concerns with regards to the funds units. “STRIPES
Global Financial Titans”, though closed and not listed, addresses this issue and tries to offer
liquid shares. Units can be sold back to an investment company on a monthly basis.

111Capital Protected Funds Survey

In New Zealand, “Westpac KiwiSaver-Capital Protection Plan 1” (2007) deploys the very
familiar CPPI + protection agreement. As explained before, this strategy imposes conservative
choices on investors as the protection provider tends to limit the exposure to growth assets. The
concerns about debt securities and cash lockouts are even greater as the fund tenure is of 10
years. “Liontamer FALLEN ANGELS Series1 (Trust 26)-Booster” (2008), managed by an Australian
company, is however of a medium term. It proposes creative features and new packaging
techniques, what they call “Smart Start” and “Booster feature”. The protection mechanism is
simple: the asset provider is liable for paying index-linked returns and to ensure capital protection.
In Singapore, the surveyed funds are both long term: “DBS Sprint Capital Protected” (2004) is
for 8 years and “GreatLink Choice Dec 2013” (2006) is for 7 years. They both use a rudimentary
protection namely investing in safe debt securities. However, it becomes more sophisticated
when they extend it with an interest rate or a total return swap. Interestingly, cancellation of DBS
units reached 408,325 as opposed to nil creation. This might be normal as the fund is maturing
soon (December 2012).

As mentioned earlier, Malaysian capital protected funds have certain characteristics.
They promise 100% capital repayment, their maturity does not exceed 5 years and the model
followed is usually that of Bond &Call Option where a large portion of the capital raised is placed
in Zero Coupon Negotiable Instruments Deposits (ZNIDs). These criteria were validated by the
funds we scrutinized: “OSK-UOB Capital Protected Gold Guru” (2009) and “RHB Dynamic Oil-Gold
Capital Protected” (2011). Notably, OSK appears to face some difficulties. In 2011, 11,250,000 of
its units were cancelled and zero created. “PNB Structured Investment” (2008) derogates from
the above mentioned rules. This is because it is not a capital protected fund per se; it is a growth
fund with capital protection embedded in its assets. It invests in structured products using Bond
+ Call Option techniques and REITs (Real Estate Investment Trust) instruments with a buy back
option.

Pakistani funds use simplistic capital protection techniques as seen in the two funds of
the final selection. “Faysal Savings Growth Fund” (2007), though a saving fund, targets capital
protection using safe debt instruments in addition to derivatives for hedging. “KASB Capital
Protected Gold Fund” (2010) deploys a variation of Bond + Call Option where exposure is taken
on commodity exchange gold contract. Indian funds submit to a stringent regulation that forces
them to operate as closed funds, to protect their capital solely through conservative and safe
assets. As a matter of fact, the surveyed funds follow these rules faithfully. Normally, fund
managers are not liable to redeem any share. “Sundaram Capital Protection Oriented Fund 5
Years” however does: in 2011, 171000 units were cancelled against zero created. An urgent need
might justify this figure. “Birla Sun Life Capital Protection Oriented Fund - Series 1” (2010), on the
other hand shows zero cancellation and zero issuance and whoever wants to redeem units has
to do it through the stock market.

Overall, we can say that the level of sophistication of capital protected funds is high in
New Zealand and Australia while it is remarkably less in other countries like Singapore, Malaysia
and Pakistan where traditional protection techniques dominate. In India, however, these can
be qualified as basic as the industry was allowed to operate only in 2006. There is diversity in
the types of assets in the region except in Malaysia and India, where cautious mixed assets and
bonds dominate.

112 Capital Protected Funds Survey

Survey results4.

The approacha.

For each fund, we tried to collect the respective prospectus and the latest annual report, •
if available.
In the prospectus, we looked for information related to: type of fund, type of assets, •
protection strategy and fund valuation.
For the funds where the type of assets was not mentioned, we scrutinized the respective •
prospectus and a website (www.morningstar.com) to confirm their asset allocation.
In the annual report, we confirm the type of assets by examining the asset allocation, and •
if the information is available, we try to address the redemption/subscription frequency.
This is presented in the form of units created or canceled during the financial year. If such
data is not disclosed, we try to deduce it by means of simplistic calculation. For instance,
we look for subscription proceeds and redemption payments for the financial year, then
we divide it by the average (NAV/share) or if it is not available, by the latest NAV. We
mention (N/A) in the Redemption/subscription frequency cell if the information is not
available or if we were unable to find the annual report.
Pertaining to secondary trading, if this information is not mentioned in the respective •
prospectus, we browse the respective stock exchange markets and check whether the
ISIN code of the fund or its name is listed in the market. If so, we consider that fund units
are traded in the secondary market, otherwise no.

113Capital Protected Funds Survey

b. Funds’ profiles

Liontamer FALLEN ANGELS Series1
(Trust 26)-Booster

Investment strategy

The Liontamer Fallen Angels Index tracks an •
equally weighted basket of 16 companies
operating across a variety of industries
around the world.
Smart start feature: With the “Smart-start”, •
investors can benefit even when the Fallen
Angels Index drops in value during the first
six months of the investment term. Smart-
start finds the lowest point at three intervals
during the first six months (initial start date,
three months and six months) and re-sets
the initial opening value of the index to that
lowest point. So even if prices keep falling
during the early stages of the investment
period, the Smart-start feature means
investors can still benefit.
Booster feature: Booster units provide 130% of the rise in the Fallen Angels Index at •
maturity. In other words, returns are boosted 1.3 times over.

Protection strategy
On maturity, and in the normal course of events, holders of this class of units would •
receive 90% of their investment amount; even if the Fallen Angles falls in value.
To ensure this, the fund buys financial instruments (Assets of the Fund) sold by the Fund •
Asset Provider, KBC Bank. KBC Bank is a Global Fortune 500 company with a Standard &
Poor’s credit rating of AA-.
The Fund Asset Provider is legally liable to pay to Liontamer as trustee of the Trusts an •
amount equivalent to the Index Linked Return and 90% of the Investment Amount.
Although the Fund Asset Provider has legal liability to make the repayments described •
above, it does not guarantee repayment of the Units or any returns on the Units, nor
does it accept any other liability to Unit holders. Therefore, Unit holders are subject to
the credit risk of the Fund Asset Provider.1

Financial institution:	  The fund is
managed by Liontamer Investment
Services Limited, which specializes
in capital protected investments.
Inception date:	 25th July 2008.
Investment Objective:	  This Fund
provides exposure to developed
market stocks with 90% capital
protection at maturity (after 5.5
yrs) and 130% of the growth in the
Fallen Angel index.
Type of assets:	  Equity.

1 Sources:
Website:
http://www.liontamer.com/investments/Trust26/invest-angelseries1.aspx?Fund=26
Investment Statement:
http://www.liontamer.com/Downloads/pdf/FA1_C5_InvestmentStatement.pdf
Factsheet:
http://www.liontamer.com/Downloads/pdf/Fallen_Angels_Fact_Sheet.pdf

114 Capital Protected Funds Survey

1  T
hi

s
ty

pe
 o

f u
ni

ts
’ v

al
ua

tio
n

is
 u

se
fu

l f
or

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ar

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on

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on

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nf
or

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d

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io

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to

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at

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ity

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at

e.

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he

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ol

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to

-m
at

ur
ity

 v
al

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 is

 a
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ar
ke

t v
al

ue
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r
a

va
lu

e
at

 w
hi

ch
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ve
st

or
s

ca
n

ex
it

th
e

fu
nd

. I
t r

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nt

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t t

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h

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it

w
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g

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ll

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ch
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e

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ve

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an

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ss

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om

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d

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ss

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ay

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de

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d

to
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ns
ur

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90

%

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pi

ta
l p

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lu

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pr

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al
cu

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sti

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ati

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he

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on
th

.1

H
ol

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at

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it

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Va

lu
ati

on
•

:
re

pr
es

en
ts

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ha

t t
he

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al

ue
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f e
ac

h
un

it
w

ou
ld

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e,

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ss

um
in

g
it

w
as

m

at
ur

in
g

to
da

y
an

d
ha

s
be

en

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ld

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r

th
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fu
ll

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rm

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iv
es

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n

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tio

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to

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e

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ve

st
or

s
on

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ow

th

ei
r

un
its

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re

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er

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rm

in
g

at
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e
tim

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al

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tio
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ch

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ge

”.
3

115Capital Protected Funds Survey

1 Sources:
http://www.bloomberg.com/quote/WESKCTR:NZ
http://www.westpac.co.nz/olcontent/olcontent.nsf/AttachmentsByTitle/Westpac+KiwiSaver+Investment+Statement
/$FILE/Westpac+KiwiSaver+Investment+Statement.pdf

Westpac KiwiSaver-Capital Protection Plan 1

Investment strategy

Each Capital Protection Plan (CPP) Fund •
is intended to open on or around the 1stof
October every year, and the maturity date
of each CPP Fund will be 10 years from its
opening date.
Prior to the opening date:
Until the opening date for a CPP Fund, the •
member’s contributions will be invested
in their Transaction Account (and will earn
interest).
After the opening date:
After the opening date of a CPP Fund, no •
more investments in that particular Fund will
be permitted.
The Manager will monitor and adjust the asset •
allocation of each CPP Fund throughout the
life of the CPP Fund to strike a predetermined
balance between maximizing the returns
that can be used to meet the expenses of the
CPP Fund and generating returns to the members, whilst ensuring that the capital value
of that CPP Fund is protected.
Each member invested in a CPP Fund will have a capital protected value equal to the •
original amount invested in the CPP Fund by that member (except where the member
has partially withdrawn from the CPP Fund).
Protection Strategy: (A variation of CPPI)
At launch, a CPP Fund is invested in growth assets (such as New Zealand, Australian and •
international shares).
If the value of the growth assets of the CPP Fund falls below certain predetermined •
levels, the Manager will adjust that CPP Fund by investing some or all of the assets of the
Fund in zero coupon bonds or deposits with the Capital Protection Provider.
The Trustee (BT Fund Management) pays the Capital Protection Provider (Westpac Bank) •
a fee in form of a percentage of the growth assets (i.e. all assets except the zero-coupon
bonds) held by a CPP Fund.
At maturity, if the aggregate value of the units held by the member in that CPP Fund is •
less than that Protected Amount, the Capital Protection Provider will be obliged to pay
that shortfall (plus any income tax on the payment of the shortfall) to the Trustee on the
maturity date. The Capital Protection Provider will not have a direct relationship with
members, and will be liable only to the Trustee.
The Capital Protection Provider has the power to enforce their balancing of the •
investment of the CPP Fund1.

Financial institution:	  The fund is
managed by BT Funds Management
(NZ) Limited.
Inception date:	  7th January 2007.
Investment Objective:	  The fund
invests in growth assets (such
as New Zealand, Australian and
international shares) and proposes
a capital protection feature.
Type of assets:	  Mixed assets.

116 Capital Protected Funds Survey

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sk
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ts
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us

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d

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ep
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t
no

t a
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ila
bl

e)

1-
 A

 v
ar

ia
ti

on
 o

f C
PP

I:
 A

ss
et

 a
llo

ca
tio

n
va

ri
es

 d
ep

en
di

ng

on
 m

ar
ke

t c
on

di
tio

ns
.

2-
 A

dd
iti

on
al

 p
ro

te
cti

on
:

Th
e

fu
nd

 tr
us

te
e

ap
po

in
ts

 a

ca
pi

ta
l p

ro
te

cti
on

 p
ro

vi
de

r
in

re

tu
rn

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r

a
fe

e
(p

er
ce

nt
ag

e
of

gr

ow
th

 a
ss

et
s)

.

Th
e

M
an

ag
er

 w
ill

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en

er
al

ly

•
ca

lc
ul

at
e

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un

it
pr

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e

ea
ch

bu

si
ne

ss
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ay
, w

hi
ch

 w
ill

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fle

ct

th
e

m
ar

ke
t v

al
ue

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f a

ss
et

s,
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ss

an
y

lia
bi

liti
es

.

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e

fu
nd

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as
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un
d

ne
ith

er
 in

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ew

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1

117Capital Protected Funds Survey

1 Product Disclosure Statement:
https://www.invesco.com.au/au/literature/PDS_CIIPG_CNA0805AU.pdf

Invesco Wholesale Protected Growth

Investment strategy

The Fund is not designed as a short-term •
investment and the manager recommends
a minimum investment timeframe of three
years.
The Fund is managed on an absolute return •
basis and should not be compared against a
benchmark.
The underlying portfolio primarily holds •
cash, as well as Australian and overseas fixed
income securities issued by governments
and corporations and some exposure to
Australian and overseas shares.
The Fund is rated as a low to medium risk •
fund. The main exposures are foreign
currencies and hedging risks.

Protection strategy: A variation of CPPI
The investment approach is to dynamically •
manage risk in the portfolio to enable the
Fund to participate in growth when markets are strong, and to reduce exposure to
financial assets in negative environments, thereby protecting the capital with the aim of
avoiding a negative return, after fees, for each fiscal year.
The protection within the portfolio is reset each year, with the aim of allowing investors •
to preserve any gains from previous years. Portfolios are strictly monitored on a daily
basis to ensure their ability to withstand a serious market crisis, and still meet the annual
protection objective.

Additional protection strategy:
 The Fund may have recourse to derivatives to a limited extent• 1.

Financial institution:	  The fund is
managed by INVESCO Australia
Ltd.
Inception date:	  19th October
1993.
Investment Objective:	  The fund
objective is to provide medium
to long-term capital growth, to
protect the capital and to avoid
a negative total return over a 12-
month period from 1 July to 30
June.
Type of assets:	  Mixed Assets.

118 Capital Protected Funds Survey

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y

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ia

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se

as
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re

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as

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(s

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1-
 A

 v
ar

ia
ti

on
 o

f C
PP

I:
a)

 A
ss

et
 a

llo
ca

tio
n

va
ri

es

de
pe

nd
in

g
on

 m
ar

ke
t

co
nd

iti
on

s.
b)

 T
he

 p
ro

te
cti

on
 w

ith
in

 th
e

po
rtf

ol
io

 is
 re

se
t e

ac
h

ye
ar

.
2-

 A
dd

iti
on

al
 p

ro
te

cti
on

:
Th

e
fu

nd
 m

ay
 h

av
e

re
co

ur
se

 to

de
ri

va
tiv

es
 fo

r
he

dg
in

g
pu

rp
os

es
.

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ni

t p
ri

ce
s

ar
e

ge
ne

ra
lly

•

ca
lc

ul
at

ed
 e

ve
ry

 B
us

in
es

s
D

ay
Th

e
fu

nd
 o

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ra

te
s

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se

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on

•

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rw

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et

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e

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o

119Capital Protected Funds Survey

Macquarie Winton Global Opportunities Trust

Investment strategy

Winton seeks to generate returns using proprietary •
research to make inferences about the future
performance of over 100 global markets. Winton
then implements its views using a portfolio of
futures contracts covering equities, fixed income,
commodities and currencies. This management
style is called “managed futures”.
According to the fund manager, this type of strategy •
has the potential to generate returns in falling
as well as rising markets. Global themes such as
commodity booms and busts, inflation, deflation,
and geopolitical events all present potential trends
which successful managed futures managers may
be able to exploit for profit.
The investment strategy of the fund is rather •
complex. It can be summarized as follows.

Financial institution:	  The fund is
managed by Macquarie Investment
Management Limited.
Inception date:	  1st December
2005.
Investment	  Objective: The fund
offers investors access to the
growth potential of an investment
managed by Winton Capital
Management Limited while
providing capital protection at the
seventh year of investment term.
Type of assets:	  Mixed assets.

Macquarie Winton Global Opportunities Trust: The
“Trust” is a managed investment scheme to be listed
on the Australia Stock Exchange that offers interests
(called Units) to investors.
Deferred Purchase Agreement “DPA”: The Trust
invests the proceeds of the Offer in the DPA issued by
Signum Blue II Limited (“Signum Blue II”), a Cayman
Islands incorporated company.
Reference Securities: Signum Blue II will purchase the
Reference Securities from Signum Rated II Limited
(“Signum Rated II”), a Cayman Islands incorporated
company. The performance of the Reference
Securities is referable to the Reference Portfolio and
Capital Protection.
Capital Protection: This is provided by Goldman Sachs
International (the “Protection Provider”) to Signum
Rated II by the provision of a put option over the
Reference Portfolio for the Capital Protected Amount.
Reference Portfolio: It consists of three main
investments, the Signum Winton Fund, the Money
Market Portfolio and the Eligible Securities. Allocations
between these are determined by the Protection
Provider under the Threshold Management Rules.
The Reference Portfolio may also comprise foreign
exchange contracts and interest rate swaps.
Signum Winton Limited: A limited liability company
established in the Cayman Islands. Signum Winton
Limited’s returns will be ultimately driven by the
performance of the Signum Winton Fund, a managed
account of Signum Winton Limited.

Source: http://www.macquarie.com.au

Figure 12: Investment Strategy of Macquarie Winton Global
Opportunities Trust

Units

DPA

Protection
Provider

Unit holders

Signum Blue II Limited

Reference Portfolio

Signum Winton Limited

Money Market Fund

Eligible Securities
Threshold
Management

Capital
Protection

Macquarie Winton Global
Opportunities Trust

Reference Securities

Signum Rated II Limited

120 Capital Protected Funds Survey

http://www.macquarie.com.au/

1 Sources:
Product disclosure Statement:
http://www.macquarie.com.au/dafiles/Internet/mgl/au/docs-pa/pds/macquarie-winton-global-opportunities-trust-
pds.pdf
Product Information:
http://www.macquarie.com.au/mgl/au/advisers/products-platforms/investments/alternative-investments/
macquarie-winton-global-opportunities-trust
Fund’s Profile:
http://www.macquarie.com.au/dafiles/Internet/mgl/au/docs/fund-review/winton-global-opportunities-trust.pdf

Protection strategy:
The capital protection strategy reposes on two pillars: The capital protection agreement •
with Goldman Sachs and the Threshold management over the Reference Portfolio.

Capital Protection Put:o

The Capital Protection arrangements are designed to ensure that, at a minimum, the •
Trust receives the value of its initial investment back on the Capital Protection Date.
Capital Protection does not apply before or after the Capital Protection Date.
Capital Protection is provided by the Protection Provider to Signum Rated II, rather than •
directly to the Trust or Unit holders, and is subject to certain conditions.
The Trust has the indirect benefit of the Protection Provider’s obligation to pay any •
shortfall between the NAV of the Reference Portfolio and the Capital Protected Amount
on the Capital Protection Date.
The Protection Provider is prepared to take on this obligation in part because it manages •
the Reference Portfolio using a method known as Threshold Management.

Threshold management( CPPI)o

In order to provide Capital Protection at the Capital Protection Date, the Protection •
Provider uses “Threshold Management” to minimize its risk of having to pay any shortfall
under the Capital Protection Put.
On each Business Day throughout the Term, the composition of the Reference Portfolio •
will be assessed by the Protection Provider and if necessary, be reallocated between the
Signum Winton Fund and the Money Market Portfolio (and other assets in the Reference
Portfolio) according to the Threshold Management Rules.
The Protection Provider uses certain indicators to determine the target allocation to the •
Signum Winton Fund.

The Margin to Equity Ratio of the Signum Winton Fund. This ratio measures o
the proportion of the Signum Winton Fund used to establish futures positions
compared to the NAV of the Signum Winton Fund. This ratio is one measure of
the Signum Winton Fund’s exposure to negative (and positive) daily movements
in value;

The NAV of the Reference Portfolio; ando

The prevailing interest rate that could be obtained from the Eligible Securities.o 1

121Capital Protected Funds Survey

Pr
ofi

le
 s

um
m

ar
y



Fu
nd

 n
am

e
Ty

pe
 o

f a
ss

et
Ty

pe
 o

f
fu

nd

Su
bs

cr
ip

ti
on

/
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de
m

pti
on

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re
qu

en
cy

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ot

ec
ti

on
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ch
ni

qu
e

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lu

ati
on

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et

ho
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co

nd
ar

y
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ad
in

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ac

qu
ar

ie

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in

to
n

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lo

ba
l

O
pp

or
tu

ni
ti

es

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us

t

M
ix

ed
 a

ss
et

s:
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tu
re

s
co

nt
ra

ct
s

co
ve

ri
ng

 e
qu

iti
es

, fi
xe

d
in

co
m

e,
 c

om
m

od
iti

es

an
d

cu
rr

en
ci

es
.

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os

ed

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um

be
r

of

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its

 in
 ‘0

00

as
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t 3
0th

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ne

20

11
1 :

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nc
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d:

3,

43
6

1-
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ap
it

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ro
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on

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gr

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en
t i

s
pr

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y
th

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ot
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tio
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ov

id
er

to

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ig

nu
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at

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, r
at

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ct

ly
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e

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ni

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2-

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PP

I:
In

 o
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 p
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de

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ap

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at

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ro
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at
e,

 th
e

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id

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ep
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ce

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e

offi
ci

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AV
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ru

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ill

•
be

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al

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la

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er

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of

ea
ch

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on

th
.

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e

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AV

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f t

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ru
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qu
al

•

to
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ig

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m

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lu

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ati

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de

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th

e
D

PA
 a

nd
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ge

ne
ra

lly
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qu
al

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 th

e
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nc
e

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ri
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(s

ee
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e
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ot
e)

Ye
s2

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ot

e

	 Th

e
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er
en

ce
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ec
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ity
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qu
al

s
th

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en

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y

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e

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m

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of
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ec

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iti

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st

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.

•
Th

e
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th

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th
e

ag
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eg
at

e
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lu
e

of
 t

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ss
et

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co

m
pr

is
in

g
th

e
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fe
re

nc
e

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rtf

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io

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in

us
 a

cc
ru

ed
 fe

es
, a

nd

•
in

te
re

st
, a

s
de

te
rm

in
ed

 b
y

th
e

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ot

ec
tio

n
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ov
id

er
 in

 a
cc

or
da

nc
e

w
ith

 th
e

N
ot

e
Pr

og
ra

m
 D

ee
d.

122 Capital Protected Funds Survey

Pre Select 100% + Cap Protected Growth 1

Investment strategy

The Fund offers Unit holders the opportunity •
to invest in an actively managed portfolio of
diversified assets managed by the responsible
entity and a number of investment managers
across a range of asset classes and investment
styles, with an element of protection of initial
capital invested.
The Fund will invest in the DWS Multi-•
manager Growth Fund (also managed by
Deutsche Managed Investments Limited)
to gain exposure to growth oriented assets.
The Fund will have exposure to derivative
investments and may also have exposure
to cash deposits to facilitate the offering
of capital protection on the initial capital
invested by Unit holders.

Protection strategy:
The capital protected price will initially be •
determined at the end of the application period by reference to the highest Net Asset
Value the Fund achieves on the last business day of any one month during the application
period (29 June 2007 – 31 May 2008), divided by the number of units on issue that day.
Between 29 June 2007 – 31 May 2013, the capital protection only applies to investments •
(including distributions which are reinvested) held until and redeemed on the capital
protection maturity date.
The fund uses CPPI to provide the capital protection: it involves a dynamic asset allocating •
between a low risk asset class (cash deposits with Deutsche Bank AG, a London branch)
and a growth oriented asset class (the DWS Multi-manager Growth Fund).
During the protection period, asset allocation can fluctuate according to market •
conditions (0% to 100% DWS Multi-manager Growth Fund, 0% to 100% Cash Deposits).
However, if the Fund holds a substantial amount of low-risk assets “cash deposits”, there
will be less opportunity for the Fund to obtain growth beyond the return it can earn on
those cash deposits.
Following the capital protection maturity date, it is intended that the Fund will generally •
have the following asset allocation investment ranges (90% to 100% DWS Multi-manager
Growth Fund, 0% to 10% Cash Deposit).

Additional protection:
Coupled with the CPPI strategy, the Fund will also invest in a derivative instrument •
issued by Deutsche Bank AG (London branch) in order to cover the risk that the Fund
might not hold sufficient cash deposits to deliver the capital protected price on the
capital protection maturity date in the event of an unexpected market movement. If this
derivative instrument is exercised during the capital protection period, the Fund assets
will be allocated wholly to cash deposits for the remainder of the capital protection
period until the capital protection maturity date.

Financial institution:	  The fund
is managed by Deutsche Asset
Management (Australia) Limited.
Inception date	 : 17th May 2007.
Investment Objective:	  The fund
aims to provide investors with
exposure to growth and cash assets
via a portfolio that is managed with
the objective to provide long term
capital growth, with an element
of protection of initial capital
invested. There is no guarantee
that this investment objective will
be achieved.
Type of assets:	  Mixed assets.

123Capital Protected Funds Survey

1  h
tt

p:
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w

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sx
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e=
I

Pr
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le
 s

um
m

ar
y



Fu
nd

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am

e
Ty

pe
 o

f a
ss

et
Ty

pe
 o

f
fu

nd

Su
bs

cr
ip

ti
on

/
Re

de
m

pti
on

 F

re
qu

en
cy

Pr
ot

ec
ti

on
 te

ch
ni

qu
e

Va
lu

ati
on

 M
et

ho
d

Se
co

nd
ar

y
 tr

ad
in

g

Pr
e

Se
le

ct
 1

00
%

+
Ca

p
Pr

ot
ec

te
d

G
ro

w
th

1

M
ix

ed
 A

ss
et

s:
Sa

fe
 a

ss
et

s:
 C

as
h

D
ep

os
its

.
Ri

sk
y

as
se

ts
: D

W
S

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ul

ti-
m

an
ag

er
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ro
w

th
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un
d

sh
ar

es
.

Cl
os

ed

N
/A

(A
nn

ua
l r

ep
or

t
no

t a
va

ila
bl

e)

CP
PI

:
a)

 T
he

 fu
nd

 d
yn

am
ic

al
ly

al

lo
ca

te
s

its
 a

ss
et

s
ac

co
rd

in
g

to
 m

ar
ke

t m
ov

em
en

t,
 th

ou
gh

it

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rs
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ro
w

th
 a

ss
et

s
as

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er

th

e
fu

nd
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bj
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tiv
e.

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dd

iti
on

al
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ro
te

cti
on

:
b)

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nd

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as

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co

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se

 to

de
ri

va
tiv

es
 to

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ce

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qu

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sk
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t t
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at

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ity

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at

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ni

t p
ri

ce
s

ar
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ne

ra
lly

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lc

ul
at

ed
 o

n
th

e
la

st
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us
in

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da
y

of
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m
on

th
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as
ed

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po

n
th

e
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AV
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f t
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un

d
di

vi
de

d
by

th

e
nu

m
be

r
of

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ni

ts
 o

n
is

su
e

in

th
e

Fu
nd

.

Th
e

fu
nd

 w
as

no

t f
ou

nd
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n
th

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A

us
tr

al
ia

n
Se

cu
ri

tie
s

Ex
ch

an
ge

W
eb

si
te

1

124 Capital Protected Funds Survey

1 Sources:
Website: https://client.ords.com.au/Individual/MF_STRGFT.shtml#
Product Disclosure Statement: https://client.ords.com.au/documents/STRGFT_PDS.pdf
*As the fund has matured since 22 June 2012, none of its documentation is available online.

STRIPES Global Financial Titans

Investment strategy

Investors will receive an exposure to the •
Dow Jones Banks Titans 30 Index (Bloomberg
DJTBAK). The Dow Jones Sector Titans Indexes
are constructed to provide exposure to the
world’s biggest and best-known companies,
aiming to reduce risk by including only the
most-established stocks.
The fund is of a four year term and it offers •
monthly liquidity through the ability to sell
back STRIPES to JPMIAL.
JPMIAL intends to publish monthly valuations •
for STRIPES and accept offers to sell STRIPES
back to JPMIAL on a monthly basis. As a result,
JPMIAL will, from time to time purchase
securities including STRIPES from Investors
and Investors may offer to sell their STRIPES
to JPMIAL prior to the Maturity Date.
The Dynamic Portfolio in STRIPES is made •
up of an Equity Asset and a Cash Asset. For
STRIPES, the Equity Asset is the Dow Jones Banks Titans 30 Index. The Cash Asset for
the Dynamic Portfolio is a notional investment in cash that earns a return based on
Australian dollar swap rates.

Protection strategy: (CPPI)
The Dynamic Portfolio is designed to provide exposure to the Equity Asset in the portfolio •
up to 200%, while ensuring that the Investor’s Principal is 100% returned at the Maturity
Date. This is achieved by actively allocating between the Equity Asset and a Cash Asset in
accordance with a set of predefined rules – the Dynamic Portfolio Rules.
Investments are more towards equity assets. Actually, maximum equity exposure is set •
at 200%, initial target equity exposure is estimated at 100% and the minimum exposure
is set at 20%.
The Dynamic Portfolio Rules work on the basis of two concepts, an Investment Floor •
which represents the current cost to buy a Cash Asset that would pay out an amount
equal to the Initial Dynamic Portfolio Value on the Maturity Date (“Investment Floor”),
and a Cushion which represents the difference between the Dynamic Portfolio Value
and the Investment Floor (“Cushion”).
The allocation between the Equity Asset and the Cash Asset within the Dynamic Portfolio •
is determined on each Rebalancing Date and if required, rebalanced in accordance with
the Dynamic Portfolio Rules. Instead of waiting for the Dynamic Portfolio Value to fall
to the then Investment Floor, a gradual rebalancing is made as the performance of the
Equity Asset and the Dynamic Portfolio Value rises and falls. This helps to ensure that the
value of the Equity Asset in the Dynamic Portfolio will be sufficient to provide the Initial
Dynamic Portfolio Value at the Maturity Date. It also provides an efficient exposure to
the Equity Asset, given the assumptions made about the Equity Asset, which determine
the Crash Size.1*

Financial institution:	  The fund is
managed by JPMorgan Investments
Australia Limited (JPMIAL).
Inception date:	  25th June 2008.
Investment Objective:	  The Fund
offers investors a way to gain
up to 200% exposure to select
global financial institutions with
100% Principal protection on the
Maturity Date.
Type of assets:	  Equity.

125Capital Protected Funds Survey

Pr
ofi

le
 s

um
m

ar
y



Fu
nd

 n
am

e
Ty

pe
 o

f a
ss

et
Ty

pe
 o

f
fu

nd

Su
bs

cr
ip

ti
on

/
Re

de
m

pti
on

 F

re
qu

en
cy

Pr
ot

ec
ti

on
 te

ch
ni

qu
e

Va
lu

ati
on

 M
et

ho
d

Se
co

nd
ar

y
 tr

ad
in

g

ST
RI

PE
S

G
lo

ba
l

Fi
na

nc
ia

l T
it

an
s

Eq
ui

ty
:

Ri
sk

y
as

se
t:

 D
ow

 Jo
ne

s
Ba

nk
s

Ti
ta

ns
 3

0
In

de
x.

Sa
fe

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ss

et
s:

 A
 n

oti
on

al

in
ve

st
m

en
t i

n
ca

sh

w
hi

ch
 e

ar
ns

 in
te

re
st

ba

se
d

on
 th

e
A

us
tr

al
ia

n
do

lla
r

sw
ap

 ra
te

s.

Cl
os

ed
N

/A
(A

nn
ua

l r
ep

or
t

no
t a

va
ila

bl
e)

CP
PI

 :
a)

 In
ve

sti
ng

 in
 s

af
e

as
se

ts
 s

o
th

at

th
ei

r
fin

al
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al
ue

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lu

s
th

e
yi

el
d

is
 e

qu
iv

al
en

t t
o

th
e

va
lu

e
of

in

iti
al

 fu
nd

 a
ss

et
s.

b)
 In

ve
st

m
en

ts
 a

re
 m

or
e

to
w

ar
ds

 e
qu

ity
 a

ss
et

s:

m
ax

im
um

 e
qu

ity
 e

xp
os

ur
e

is
 s

et
 a

t 2
00

%
, i

ni
tia

l t
ar

ge
t

eq
ui

ty
 e

xp
os

ur
e

is
 1

00
%

 a
nd

th

e
m

in
im

um
 e

xp
os

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e

is

20
%

.

Th
e

N
AV

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f t

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nd
s

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•

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ay

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(s

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th
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ch
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ot

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
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Po

rtf
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 V

al
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: T
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 v
al

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 o

f t
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 n
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ve

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m

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to
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ity

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Eq

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om

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: T

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ed

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JP
M

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L.

•
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of
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et

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t t

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on

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D

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pr

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pr

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ity

 D
at

e

126 Capital Protected Funds Survey

1 Sources:
Prospectus:
http://www.nikkoam.com.sg/files/documents/funds/prospectus/sprint.pdf
Fund’s profile:
http://www.bloomberg.com/quote/DBSSPCP:SP

DBS Sprint Capital Protected

Investment strategy

Being a unit trust, the Fund is also a sub-fund •
under the umbrella unit trust known as the
DBSAM (DBS Asset Management) Unit Trust
Funds.
The Fund’s objectives are as follow:•

100% capital protection at the end of o
the eight-year maturity period, which
is ending 1 December 2012.

A Fixed Payout of 6.5% of the o
capital invested after a year of the
commencement date.

Variable Payouts linked to the o
performance of the synthetic interest
rate for deposits in Singapore Dollars
(the “SGD-SOR-Telerate Arrears),
to be paid after each successive
anniversary after the first anniversary
of the commencement date. (In total,
there would be 7 Variable Payouts)

Protection strategy:
In order to provide investors with 100% capital protection, the Fund will invest 100% of •
its net assets in a combination of debt securities issued by corporations, governments,
government agencies or supranationals.
These debt securities shall be selected at the discretion of the Managers upon •
consultation with DBS Bank Ltd (“DBS”).
Interest earned from the above mentioned securities will be swapped with DBS Bank in •
exchange for the Fixed Payout and the seven Variable Payouts.1

Financial institution:	  The fund
is managed by Nikko Asset
Management Asia Limited.
Inception date:	  12th March 2004.
Investment Objective: The fund’s 
aim is to seek capital appreciation
while providing full capital
protection for investors at the end
of the maturity period of 8 years.
Type of assets:	  Bond.

127Capital Protected Funds Survey

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is

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ur
ed

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y

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sti
ng

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de
bt

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ec

ur
iti

es
.

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e

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AV

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f t

he
 fu

nd
 is

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cu
la

te
d

•
ba

se
d

on
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rw
ar

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pr

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in

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an

d
is

pu

bl
is

he
d

ea
ch

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us

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es

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da

y.

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e

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nd

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ou

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ng
ap

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e

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ch

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ge

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eb

si
te

2

128 Capital Protected Funds Survey

1Sources:
Fund’s report:
http://www.lifeisgreat.com.sg/en/jsp/pdf/funds/greatlinkchoicedec2013.pdf
Fund’s profile:
http://www.bloomberg.com/quote/GLCHO13:SP

GreatLink Choice (Dec 2013)

Investment strategy

GreatLink Choice (Dec 2013) is an investment-•
linked insurance fund established in
Singapore.
The Fund objective is to seek to provide •
policyholders with:

Annual payout of 4.60% of the o
Initial Unit Price per Unit held by
each policyholder as at each policy
anniversary (on 31 Dec 2007, 31 Dec
2008, 31 Dec 2009, 31 Dec 2010, 31
Dec 2011, 31 Dec 2012).

Policyholders will have to hold their o
investments in the GreatLink Choice
for the entire policy term of 7 years
before they are eligible to receive the
total payouts projected and 100% of
their principal invested at maturity.

The fund performance is benchmarked to an •
index: 7-year Singapore swap rate (mid rate) taken on the start of the initial offer period
on 1 November 2006, i.e. 3.465%
Collateral was held in cash since 30 October 2009.•

Protection strategy
Capital protection is ensured by investing in low risk debt securities. Actually, capital •
raised less all charges deducted is invested in notes (the “Signum Notes”) issued by
Signum Platinum Limited “SPL”, which are rated at a minimum rating of “AA” by Standard
& Poor’s on the Inception Date.
The annual payouts and return of principal invested are provided for by the debt •
securities and derivative transactions employed as part of the investment approach of
the funds and not backed by a guarantee.
Policyholders may lose part or all of their investment in the funds in the event of a •
downgrade of the debt securities, default by the issuers of the debt securities, a default
of the swap counterparty to the derivative transactions or an early redemption of the
Note.
Additional protection:•
The default risk, liquidation risk, foreign currency risk, and early redemption risk on the •
Collateral will be borne by Goldman Sachs International (“GSI”) under the obligation of
a Total Return Swap between SPL and GSI.1

Financial institution:	  The fund is
managed by Lion Global Investors
Limited.
Inception date:	  31st December
2006.
Investment Objective:	  The Fund’s
objective is to provide annual
payouts and capital protection at
maturity.
Type of assets:	  Bonds.

129Capital Protected Funds Survey

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on

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130 Capital Protected Funds Survey

1 Sources:
Fund’s profile: http://www.oskuob.com.my/OSKUOB/page.jsp?name=funddtl_GURU
Prospectus:
http://www.oskuob.com.my/OSKUOB/images/Prospectus%20and%20Infor%20Memo/2009/OSK-UOB%20
Capital%20Protected%20Gold%20Guru%20Prospectus.pdf

OSK-UOB Capital Protected Gold
Guru Fund

Investment strategy

The fund is suitable for investors who:•
have a very low risk tolerance, since o
investments are primarily made in
debt securities.

seek capital appreciation from the o
potential returns from the different
asset classes under the Gold Guru
Strategy, on the maturity date (4
years as from the inception).

seek 100% capital protection on the o
maturity date, and

have a medium term investment o
horizon.

Protection Strategy
The fund offers investors capital protection •
from its investments in debt securities and
potential returns from its investments in the Option.
88% to 95% of net assets value: Investments in 4-year Zero Coupon Negotiable •
Instruments of Deposits (ZNIDs) issued.
Up to 10% Investment in the 4-year over the counter call option whose underlying asset •
is the Gold Guru Strategy (Option) to generate the returns of the funds.
Up to 2% of Net Asset Value: liquid assets.• 1

Financial institution:	  The fund is
managed by OSK-UOB Unit Trust
Management Berhad.
Inception date:	  13th August 2009.
Investment Objective:	  The
objective of the Fund is to provide
capital appreciation over the
medium term whilst protecting
investors’ capital on the Maturity
date.
Type of assets:	  Bond.

131Capital Protected Funds Survey

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f D
ep

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as
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sk

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as

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um

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e

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as
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n

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nd
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ev
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ay

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st

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2

132 Capital Protected Funds Survey

1 Sources:
Prospectus: http://rhbim.rhb.com.my/unit_trust/pdf/RHB%20Dynamic%20Oil-Gold%20Capital%20Protected%20
Fund.pdf
Fund’s profile:
http://my.morningstar.com/ap/quicktake/overview.aspx?PerformanceId=0P0000SX52 , http://invest.com.my/
personal/funds/profile/one?fund_id=856 or http://www.bloomberg.com/quote/RHBDOIL:MK

RHB Dynamic Oil-Gold Capital Protected

Investment strategy

The fund is a 3-year capital protected fund
suitable for investors who have a low risk profile
and want to have exposure to both the oil and
gold via a dynamic asset allocation strategy.

Protection Strategy
The fund offers investors capital protection •
from its investments in debt securities and
potential returns from its investments in OTC
Options.
The Fund will invest at least 85% of the •
capital raised during the Initial Offer Period
in Zero-coupon Negotiable Instruments of
Deposits (“ZNIDs”). Upon maturity of the
Fund, the ZNIDs invested will return a value
equivalent to 100% of the capital invested by
investors. This capital protection covers the
investors’ capital investment and the sales
charge payable by the investors.
Up to 10% of the Fund’s NAV will be invested in an over-the-counter (“OTC”) option. The •
option is linked to the performance of the Option Strategy, which maximizes its return
through dynamic investment into either oil or gold.
Up to 5% of the Fund’s NAV is held in cash or cash equivalents.• 1

Financial institution:	  The fund
is managed by RHB Investment
Management Sdn. Berhad.
Inception date:	  11th March 2011.
Investment Objective:	  The Fund
seeks to provide capital protection
at the maturity of the Fund and
capital growth over the tenure of
the Fund.
Type of assets:	  Bond.

133Capital Protected Funds Survey

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D
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nd

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fe
 a

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s:
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In

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ru

m
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ts
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f D
ep

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sk

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ts

: O
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ol

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pe

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/A

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nn

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 B

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al
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pti
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s:
 a

) T
o

pr
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ve

 th
e

ca
pi

ta
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at

le
as

t 8
5%

 o
f n

et
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ss
et

s
va

lu
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is
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ve
st

ed
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st

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TC

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pti

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ke

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to

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il

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ld

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se

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to

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ra

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rn

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e

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al
ue

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at

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ir

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al

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n
•

da
ily

 b
as

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nd
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om

pl
ia

nc
e

w
ith

th

e
SC

’s
 v

al
ua

tio
n

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id

el
in

es
.

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e

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nd

’s
 d

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s

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t a

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ea

r
in

 th
e

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te

d

se
cu

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ty

 li
st

s.
1

134 Capital Protected Funds Survey

1 Fund’s profile:
http://www.ambmutual.com.my/sif.htm# , http://www.bloomberg.com/quote/PNBSTIN:MK and http://
my.morningstar.com/ap/quicktake/overview.aspx?PerformanceId=0P0000I2CE&activetab=Overview

PNB Structured Investment

Investment strategy

PNB Structured Investment Fund is a •
5-year closed-end unit trust established in
Malaysia.
Though it has a capital protected mechanism •
embedded in its structure, it is not
considered as a capital protected fund. It is
rather categorized as an income and growth
fund that generates reasonable returns
throughout its tenure.
In selecting its investments, the Fund •
searches for strong undervalued investment
opportunities that show potential for long-
term capital appreciation as well as income.
The Fund will be investing in a diversified
portfolio of Structured Products, PNB REIT,
cash equivalent instruments and any other
investments permitted by the Deed. Assets
are allocated as follows:

Up to 80% NAV in Structured Products: Ringgit-denominated products that are o
principal protected upon maturity. For diversification purposes in Structured
Products, the Fund will be investing in a portfolio of Structured Products with
exposure linked to one or more assets such as global equities, interest rates,
indices or any other underlying(s), as may be permitted under the Deed.

Up to 50% NAV in PNB REIT: these offer potential regular income and upside o
potential through exposure in properties. PNB REIT has principal protection
features.

Up to 80% NAV investments that are permitted by the Deed: these include a o
diversified portfolio of listed securities, unlisted securities and fixed income
securities in Malaysia or any other Eligible Market.

A minimum of 2% NAV will be invested in cash equivalent instruments and o
money market instruments to meet liquidity requirements.1

Protection Strategy
Capital protection mechanism is embedded within portfolio components. Actually, •
capital can be preserved through investments in a combination of Structured Products
and PNB REIT whilst capitalizing on the returns derived from investing in a PNB REIT as
well as the potential returns of investing in Structured Products derived from exposure
to the performance of the underlying asset(s).

Structured Products’ capital protection mechanism:o

Principal protection may be sought through financial instruments purchased by the •
issuer, as deemed appropriate for protecting the principal invested in the Structured
Products. Such financial instruments may in turn be managed under Dynamic Investment
Allocation Mechanism (DIAM).
The financial instruments could take the form of money market instruments (which •
generate income on a short term low risk basis) and/or fixed income instruments (which

Financial institution:	  The fund
company is Amanah Mutual
Berhad.
Inception date:	  12th May 2008.
Investment Objective:	  The Fund
seeks to provide investment
opportunities that generate
reasonable returns and growth
over the tenure of the Fund while
endeavoring to provide capital
protection to Units Holders.
Type of assets:	  Mixed assets.

135Capital Protected Funds Survey

1 Prospectus:
http://www.ambmutual.com.my/downloads/Master%20Prospectus%202011-12.PDF

are bought at a discount to provide a nominal value equivalent to the capital sought
to be protected at maturity). Interest earned or money not invested on those financial
instruments may be used to purchase option(s) on the underlying(s).
Under the DIAM, exposure is allocated between the underlying and risk free asset(s), •
depending on the performance of the underlying. Should the underlying underperform;
more exposure is then allocated to the risk free asset(s).

PNB REIT capital protection mechanism:o

PNB REIT has principal protection features whereby its properties have a buy-back option •
from the respective vendors to repurchase the properties at the highest price offered
by third party purchasers or the original purchase price plus capital expenditure on the
respective property, whichever is the higher, and subject to the REITs Guidelines.1

136 Capital Protected Funds Survey

1  L
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ay

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l

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ofi

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um
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ar
y

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nd

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am

e
Ty

pe
 o

f a
ss

et
Ty

pe
 o

f
fu

nd

Su
bs

cr
ip

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on

/
Re

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m

pti
on

 F

re
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en
cy

Pr
ot

ec
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on
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ch
ni

qu
e

Va
lu

ati
on

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et

ho
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co

nd
ar

y
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ad
in

g

PN
B

St
ru

ct
ur

ed

In
ve

st
m

en
t

M
ix

ed
 a

ss
et

s:
Ri

ng
gi

t-
de

no
m

in
at

ed

St
ru

ct
ur

ed
 P

ro
du

ct
s,

PN

B
RE

IT
, c

as
h

eq
ui

va
le

nt
 in

st
ru

m
en

ts
,

po
rtf

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io

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f l

is
te

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se

cu
ri

tie
s,

 u
nl

is
te

d
se

cu
ri

tie
s

an
d

fix
ed

in

co
m

e
se

cu
ri

tie
s

in

M
al

ay
si

a
or

 a
ny

 o
th

er

El
ig

ib
le

 M
ar

ke
t.

Cl
os

ed
N

/A
(A

nn
ua

l r
ep

or
t

no
t a

va
ila

bl
e)

Em
be

dd
ed

 c
ap

it
al

 p
ro

te
cti

on
 in

po

rtf
ol

io
 c

om
po

ne
nt

s
:

 a
) S

tr
uc

tu
re

d
pr

od
uc

ts
 c

ap
ita

l
pr

ot
ec

tio
n

m
ec

ha
ni

sm
:

Co
m

bi
ne

s
sa

fe
 a

ss
et

s
+

op
ti

on
 s

tr
at

eg
y

an
d

D
yn

am
ic

as

se
t a

llo
ca

ti
on

 b
et

w
ee

n
sa

fe

as
se

ts
 a

nd
 u

nd
er

ly
in

g
as

se
ts

.
b)

 P
N

B
RE

IT
 c

ap
ita

l p
ro

te
cti

on

m
ec

ha
ni

sm
: p

ro
pe

rti
es

 h
av

e
a

bu
y

ba
ck

 o
pti

on
 fr

om
 th

e
re

sp
ec

tiv
e

ve
nd

or
s.

Th
e

N
AV

 p
er

 U
ni

t i
s

co
m

pu
te

d
on

•

Fo
rw

ar
d

Pr
ic

in
g

ba
si

s
an

d
is

 d
ai

ly

pu
bl

is
he

d.

Th
e

fu
nd

 d
oe

s
no

t a
pp

ea
r

in

lis
te

d
se

cu
ri

ty

lis
ts

.1

137Capital Protected Funds Survey

1 Fund’s profile:
http://www.faysalfunds.com/html/FSGF.html
Prospectus:
http://www.faysalfunds.com/docs/offering-document.pdf

Faysal Savings Growth Fund

Investment strategy

The corpus of the Fund, in line with its •
Investment Objectives, will be investing
in a range of liquid money market & debt
instruments.
The investment portfolio will primarily •
comprise of Government of Pakistan
Investment Bonds, Federal Investment
Bonds, Bank Deposits, Treasury Bills, listed or
privately placed debt securities, Certificates
of Investments and other securities allowed
by Securities & Exchange Commission of
Pakistan.

Protection Strategy
The foundation of capital protection is the •
type of assets that compose the fund’s
portfolio.
As outlined above, the fund invests primarily •
in money market and debt securities having
good credit rating and liquidity. Besides, the fund has a low risk profile and targets
reasonable returns.

Additional protection:
The manager may seek to enhance the return on the Fund or to protect its value through •
derivatives. The investment in this class shall only be for hedging purposes.1

Financial institution:	  The fund
is managed by Faysal Asset
Management Limited.
Inception date:	  12th May 2007.
Investment Objective:	  The Fund
seeks maximum preservation of
capital and a reasonable rate of
return via investing primarily in
money market and debt securities
having good credit rating and
liquidity.
Type of assets:	  Bond.

138 Capital Protected Funds Survey

1  A
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 3

0th
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k:

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nd

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l/

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G

F.
ht

m
l

Pr
ofi

le
 s

um
m

ar
y



Fu
nd

 n
am

e
Ty

pe
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f a
ss

et
Ty

pe
 o

f
fu

nd

Su
bs

cr
ip

ti
on

/
Re

de
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pti
on

 F

re
qu

en
cy

Pr
ot

ec
ti

on
 te

ch
ni

qu
e

Va
lu

ati
on

 M
et

ho
d

Se
co

nd
ar

y
 tr

ad
in

g

Fa
ys

al
 S

av
in

gs

G
ro

w
th

 F
un

d

Bo
nd

:
Sa

fe
 a

ss
et

s:
 M

on
ey

m

ar
ke

t i
ns

tr
um

en
ts

 a
nd

go

ve
rn

m
en

t/
 p

ub
lic

 d
eb

t
se

cu
ri

tie
s.

O
pe

n-
en

de
d

N
um

be
r

of

un
its

 a
s

at
 3

0th

Ju
ne

 2
01

11 :
Cr

ea
te

d:

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,1

73
,5

77
Ca

nc
el

le
d:

11

5,
46

7,
36

2

1-
 In

ve
sti

ng
 in

 s
af

e
as

se
ts

:
Th

e
fu

nd
 in

ve
st

s
pr

im
ar

ily

in
 m

on
ey

 m
ar

ke
t a

nd
 d

eb
t

se
cu

ri
tie

s
w

ith
 g

oo
d

cr
ed

it
ra

tin
g.

2-
 A

dd
iti

on
al

 p
ro

te
cti

on
:

Th
e

m
an

ag
er

 is
 a

llo
w

ed

to
 in

ve
st

 in
 d

er
iv

ati
ve

s
fo

r
he

dg
in

g
pu

rp
os

es
.

Th
e

N
AV

 is
 c

al
cu

la
te

d
us

in
g

•
fo

rw
ar

d
pr

ic
in

g
an

d
on

 a
 d

ai
ly

ba

si
s

aft
er

 th
e

cl
os

e
of

 th
e

St
oc

k
Ex

ch
an

ge
(s

) /
 F

in
an

ci
al

 M
ar

ke
t(

s)
Ye

s

139Capital Protected Funds Survey

1 Sources:
Fund’s profile: http://www.kasb.com/funds/funds_page.aspx?code=6
Prospectus: http://www.kasb.com/sitedata/downloads/Funds/20100208125407625_Offering%20Document.pdf
Factsheet: http://www.kasb.com/sitedata/downloads/Funds/20120111010143335_FMR%20Dec%202011.pdf

KASB Capital Protected Gold Fund

Investment strategy

The fund aims to realize reasonable returns
commensurate with the low risk inherent
investment profile and in line with the capital
protection objective.

Protection Strategy
The fund makes a distinction between •
the “capital protected portion” and the
“investment portion”.
Capital protected portion• : The fund protects
investors’ capital at maturity through the
investment structure by placing a significant
percentage of the Fund as term deposit(s)
with Scheduled Commercial Bank(s) or
Development Finance Institutions (DFIs)
having a minimum long term rating of ‘AA-‘
assigned by credit rating agency registered
with the Commission.
Investment Portion• : Remaining funds are
utilized to gain exposure to Gold through the Commodity Exchange listed gold contracts
in Pakistani Rupees providing higher return possibilities; they could be kept in cash if the
fund management believes an investment in gold to be unattractive at any point.1

Financial institution:	  The fund is
managed by KASB Fund Limited.
Inception date:	  19th March 2010.
Investment Objective:	  The fund
aims to protect investors’ capital
upon maturity of the Fund i.e 2
years and is ideal for all investors
who want to take advantage of the
growth in the value of Gold as an
asset class in Rupee terms.
Type of assets:	  Bond.

140 Capital Protected Funds Survey

1  A
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0th
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ot

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on
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ch
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lu

ati
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et

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co

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ad
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KA
SB

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ap

it
al

Pr

ot
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te
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G
ol

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Fu

nd

Bo
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:
Sa

fe
 a

ss
et

s:
 T

er
m

de

po
si

ts
 in

 c
om

m
er

ci
al

ba

nk
s

or
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ev
el

op
m

en
t

fin
an

ce
 in

sti
tu

tio
ns

, c
as

h
an

d
ca

sh
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qu
iv

al
en

t.
Ri

sk
y

as
se

ts
: L

im
ite

d
ex

po
su

re
 to

 C
om

m
od

ity

Ex
ch

an
ge

 li
st

ed
 g

ol
d

co
nt

ra
ct

s.

O
pe

n-
en

de
d

N
um

be
r

of

un
its

 a
s

at
 3

0th

Ju
ne

 2
01

11
:

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ea

te
d:

13

3,
07

3
(a

s
bo

nu
s

un
its

)
Ca

nc
el

ati
on

:
14

1,
44

7

In
ve

sti
ng

 in
 s

af
e

as
se

ts
:

Th
e

bu
lk

 o
f t

he
 in

iti
al

 c
ap

ita
l i

s
in

ve
st

ed
 in

 T
er

m
 D

ep
os

its
 h

av
in

g
a

m
in

im
um

 lo
ng

 te
rm

 ra
tin

g
of

 “A
A-

”.

Th
e

N
AV

 is
 c

al
cu

la
te

d
us

in
g

•
Fo

rw
ar

d
D

ay
 P

ri
ci

ng
.

Ye
s

141Capital Protected Funds Survey

1 Sources:
Fund’s Profile: http://www.sbimf.com/Products/HybridSchemes/SBI_Capital_Protection_Oriented_Fund_Series_I.aspx
Prospectus:
http://www.sbimf.com/Libraries/Offer_Document/SBI_Capital_Protection_Oriented_Fund_-_Series_1.sflb.ashx

SBI Capital Protection Oriented Fund - Series I

Investment strategy

To provide regular income, liquidity and •
returns to the investors, the fund would
generally apply the following asset
allocation:

Debt Securities & Money market o
instruments are allocated to 73%
to 100% of the assets’ value.
These have medium to low risk
profile.

Securitized Debts (part of Debt o
securities) could be allocated 0%
to 20% of assets’ value. These
have Medium risk profile.

Equity and equity related o
instruments including derivatives
could be allocated 27% of the
assets’ value.

Protection Strategy
The bulk of the investment portfolio is allocated to low to medium risk profile assets •
while the component remains very limited (less than 27%).
Debt Investments will be in Government Securities and in securities having the highest •
investment grade rating. Investments in debt securities in the scheme will be largely
limited to those having maturities not exceeding the residual maturity of the scheme.
The scheme will invest in fixed debt instruments only.
The scheme shall follow a passive investment strategy for the fixed income component.•

Additional protection
To a limited extent, the fund is allowed to use rebalancing techniques and derivatives •
for hedging purposes.1

Financial institution:	  The fund
company is SBI Funds Management
Private Limited.
Inception date:	  21st December
2007.
Investment Objective:	  The
Fund endeavors to protect the
capital invested through focused
investments in debt and money
market instruments as well as
equity while at the same time
also seeking to provide investors
with opportunities for long-term
growth in capital.
Type of assets:	  Mixed assets.

142 Capital Protected Funds Survey

Pr
ofi

le
 s

um
m

ar
y



Fu
nd

 n
am

e
Ty

pe
 o

f a
ss

et
Ty

pe
 o

f
fu

nd

Su
bs

cr
ip

ti
on

/
Re

de
m

pti
on

 F

re
qu

en
cy

Pr
ot

ec
ti

on
 te

ch
ni

qu
e

Va
lu

ati
on

 M
et

ho
d

Se
co

nd
ar

y
 tr

ad
in

g

SB
I C

ap
it

al

Pr
ot

ec
ti

on

O
ri

en
te

d
Fu

nd
 -

Se
ri

es
 I

M
ix

ed
 a

ss
et

s:
Sa

fe
 a

ss
et

s:
 D

eb
t

se
cu

ri
tie

s
an

d
m

on
ey

m

ar
ke

t i
ns

tr
um

en
ts

Ri
sk

y
as

se
ts

: E
qu

ity
.

Cl
os

e-
en

de
d

N
/A

(A
nn

ua
l r

ep
or

t
no

t a
va

ila
bl

e)

1-
In

ve
sti

ng
 in

 s
af

e
as

se
ts

:
M

or
e

th
an

 7
3%

 o
f t

he
 a

ss
et

s’

va
lu

e
is

 in
ve

st
ed

 in
 A

A
A

 fi
xe

d
de

bt
 s

ec
ur

iti
es

.
2-

A
dd

iti
on

al
 p

ro
te

cti
on

:
Th

e
fu

nd
 m

ay
 u

se
 re

ba
la

nc
in

g
te

ch
ni

qu
es

 a
nd

 d
er

iv
ati

ve
s

fo
r

he
dg

in
g

pu
rp

os
es

.

Th
e

N
AV

 is
 c

al
cu

la
te

d
us

in
g

•
Fo

rw
ar

d
Pr

ic
in

g
an

d
is

 p
ub

lis
he

d
on

 a
 w

ee
kl

y
ba

si
s.

N
o

143Capital Protected Funds Survey

Sundaram Capital Protection Oriented
Fund 5 Years

Investment strategy

The objective of this Scheme would be to •
seek income and minimize risk of capital
loss by investing in a portfolio of fixed-
income securities. The scheme may invest
a part of the assets in equity to seek capital
appreciation.
The Asset Allocation pattern of the scheme •
would be as follows:

Fixed-income securities including o
money market instruments, if any,
70%-100% of the NAV.

Equity and equity related instruments-o
0-32% of the NAV.

The Scheme’s portfolio structure has been •
rated as AAA for its capital protection
orientation (by CRISIL, the Indian rating
agency, a Standard & Poor company1). This
rating indicates the highest degree of certainty regarding payment of the face value of
the investment to unit holders.

Protection Strategy
The Scheme shall ensure capital protection orientation by adopting a Static Hedge •
approach. Capital protection will be provided solely through the fixed-income component
of the portfolio.
The fixed-income portfolio shall be invested in securities that mature to the capital value •
(initial consideration) at the end of the scheme.
The scheme shall follow a passive investment strategy for the fixed income components. •
These are invested on a held-to-maturity basis in order to avoid the impact of market
risk on account of interest rate movements.
As investments will be in fixed-income securities of highest investment grade, the risk of •
default is mitigated.
The remainder (the difference between the capital raised and present value of the capital) •
is invested in equity, which could provide a possible upside to the fund. Appreciation in
the equity component, if any, constitutes additional returns to the scheme.
The scheme may review the above pattern of investments based on views on the debt •
markets and asset-liability management needs. The portfolio shall be reviewed on a
regular basis.2

Additional protection:
Trading in derivatives shall be restricted to hedging and portfolio balancing purposes. •
The scheme will use derivative instruments such as interest rate swaps, options on
interest rate and forward rate agreements, to name a few.
Exposure to derivatives will be limited to 50% of the Net Asset Value of the scheme at •

Financial institution:	  The fund
is managed by Sundaram Asset
Management Company Limited.
Inception date:	  7th August 2007.
Investment Objective:	  To protect
the capital by investing in high
quality fixed income securities
as the primary objective and
generate capital appreciation by
investing in equity and equity
related instruments as a secondary
objective.
Type of assets:	  Mixed assets.

1 http://www.crisil.com/index.jsp
2 Sources:
Prospectus: http://www.sebi.gov.in/cms/sebi_data/attachdocs/1312974145343.pdf
Fund’s profile:
http://www.trustnetmiddleeast.com/Factsheets/Factsheet.aspx?fundCode=DQFK8&univ=DE

144 Capital Protected Funds Survey

the time of a transaction. Exposure is calculated as the notional value as a percentage of
net assets of the scheme.
The scheme shall fully cover its positions in the derivatives market by holding underlying •
securities/cash or cash equivalents/option and/or obligations for acquiring underlying
assets to honor the obligations contracted in the derivatives market. Separate records
shall be maintained for holding the cash and cash equivalents/securities for this purpose.
The securities held shall be marked-to-market by the Investment Manager to ensure full
coverage of investments made in derivative products at all times.

145Capital Protected Funds Survey

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Va
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nd

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Ye
ar

s

M
ix

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et

s:
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fe
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et

s:
 F

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e
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cu
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in
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t

in
st

ru
m

en
ts

, c
as

h
an

d
ca

sh
 e

qu
iv

al
en

t.
Ri

sk
y

as
se

ts
: E

qu
ity

.

Cl
os

ed
-

en
d

N
um

be
r

of

un
its

 a
s

at
 3

1st

M
ar

ch
 2

01
11 :

Cr
ea

te
d:

 0
Ca

nc
el

ati
on

:
17

1,
00

0

1-
 In

ve
sti

ng
 in

 s
af

e
as

se
ts

:
Th

e
fu

nd
 a

do
pt

s
a

st
ati

c
he

dg
in

g
st

ra
te

gy
 b

y
ho

ld
in

g
to

 m
at

ur
ity

 h
ig

hl
y

ra
te

d
fix

ed
 in

co
m

e
se

cu
ri

tie
s

th
at

co

ns
tit

ut
e

70
%

 to
 1

00
%

 o
f t

he

N
AV

.
2-

 A
dd

iti
on

al
 p

ro
te

cti
on

:
Th

e
fu

nd
 is

 a
llo

w
ed

 to
 in

ve
st

up

 to
 5

0%
 o

f t
he

 N
AV

 in

fix
ed

 in
co

m
e

de
ri

va
tiv

es
 fo

r
he

dg
in

g
pu

rp
os

es
 o

nl
y.

Th
e

N
AV

 is
 c

om
pu

te
d

at
 th

e
en

d
•

of
 e

ac
h

w
or

ki
ng

 d
ay

 in
 a

cc
or

da
nc

e

w
ith

 S
EB

I2  re
gu

la
tio

ns
.

Ye
s3

146 Capital Protected Funds Survey

1 Sources:
Prospectus:
http://www.fundsupermart.co.in/main/admin/buy/prospectus/prospectusBSL0410.pdf

Birla Sun Life Capital Protection Oriented
Fund-Series 1

Investment strategy

The Asset Allocation pattern of the scheme •
would be as follows:

Debt securities and money market o
instruments, 80% to 100% of the
NAV.

Equity and equity related o
instruments, 0-20% of the NAV.

Birla Sun Life Capital Protection Oriented •
Fund - Series 1 is rated AAA by CRISIL.
The rating indicates the highest degree of
certainty regarding payment of face value of
investment.

Protection Strategy
The Scheme shall ensure capital protection •
orientation by adopting a Static Hedge
approach. Capital protection will be provided
solely through the fixed-income component of the portfolio.
The scheme shall invest mainly in highly rated debt securities that mature on or before •
the date of the maturity of the scheme.
Subject to the Regulations, the asset allocation pattern indicated above may change from •
time to time, keeping in view market conditions, market opportunities, and political and
economic factors.

Additional protection:
The scheme intends to use OTC and Exchange-traded derivatives like interest rate swaps, •
forward rate agreement, stock options, stock futures, index options, index futures or
other equity derivative instruments as may be introduced from time to time.
These instruments should be solely used for hedging purposes and subject to certain •
investment restrictions.1

Financial institution:	  The fund is
managed by Birla Sun Life Asset
Management Company Limited.
Inception date:	  29th March 2010.
Investment Objective:	  To seek
capital protection by investing in
high quality fixed income securities
maturing in line with the tenure of
the scheme and seeking capital
appreciation by investing in equity
and equity related instruments.
Type of assets:	  Mixed assets.

147Capital Protected Funds Survey

1  N
o

re
de

m
pti

on
/r

ep
ur

ch
as

e
of

 u
ni

ts
 s

ha
ll

be
 a

llo
w

ed
 p

ri
or

 to
 th

e
m

at
ur

ity
 o

f t
he

 s
ch

em
e.

 In
ve

st
or

s
w

is
hi

ng
 to

 e
xi

t m
ay

 d
o

so
 th

ro
ug

h
st

oc
k

ex
ch

an
ge

 m
od

e.

2  A
nn

ua
l r

ep
or

t o
f t

he
 3

1t
h

M
ar

ch
 2

01
1:

htt

p:
//

m
ut

ua
lfu

nd
.b

ir
la

su
nl

ife
.c

om
/

3  L
is

te
d

in
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ati
on

al
 S

to
ck

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xc

ha
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e
of

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di

a:

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p:

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w

.n
se

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di

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m
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Pr
ofi

le
 s

um
m

ar
y



Fu
nd

 n
am

e
Ty

pe
 o

f a
ss

et
Ty

pe
 o

f
fu

nd

Su
bs

cr
ip

ti
on

/
Re

de
m

pti
on

 F

re
qu

en
cy

Pr
ot

ec
ti

on
 te

ch
ni

qu
e

Va
lu

ati
on

 M
et

ho
d

Se
co

nd
ar

y
 tr

ad
in

g

Bi
rl

a
Su

n
Li

fe

Ca
pi

ta
l P

ro
te

cti
on

O

ri
en

te
d

Fu
nd

-
Se

ri
es

1

M
ix

ed
 a

ss
et

s:
Sa

fe
 a

ss
et

s:
 F

ix
ed

in

co
m

e
se

cu
ri

tie
s

in
cl

ud
in

g
m

on
ey

 m
ar

ke
t

in
st

ru
m

en
ts

, c
as

h
an

d
ca

sh
 e

qu
iv

al
en

t.
Ri

sk
y

as
se

t:
 E

qu
ity

.

Cl
os

ed
-

en
d1

N
um

be
r

of

un
its

 a
s

at
 3

1st

M
ar

ch
 2

01
12 :

Cr
ea

te
d:

 0
Ca

nc
el

ed
: 0

1-
 In

ve
sti

ng
 in

 s
af

e
as

se
ts

:
Th

e
fu

nd
 a

do
pt

s
a

st
ati

c
he

dg
in

g
st

ra
te

gy
 b

y
ho

ld
in

g
to

 m
at

ur
ity

 h
ig

hl
y

ra
te

d
fix

ed
 in

co
m

e
se

cu
ri

tie
s

th
at

co

ns
tit

ut
e

80
%

 to
 1

00
%

 o
f t

he

N
AV

.
2-

 A
dd

iti
on

al
 p

ro
te

cti
on

:
Th

e
fu

nd
 is

 a
llo

w
ed

 to
 in

ve
st

in

 d
er

iv
ati

ve
s

to
 a

 li
m

ite
d

ex
te

nt
, f

or
 h

ed
gi

ng
 p

ur
po

se
s

on
ly

.

Th
e

N
AV

 is
 c

om
pu

te
d

at
 th

e
•

en
d

of
 e

ac
h

w
or

ki
ng

 d
ay

 in

ac
co

rd
an

ce
 w

ith
 S

EB
I r

eg
ul

ati
on

s.
Ye

s3

148 Capital Protected Funds Survey

1 An associate of Moody’s investors services: http://www.icra.in/
2 Sources:
Prospectus: http://www.axismf.com/Downloads/SIDFinal.pdf
Fund’s profile:
http://moneyvriksh.com/blog/nfo-axis-capital-protection-oriented-fund-series-1/

Axis Capital Protection Oriented Fund -
Series 1

Investment strategy

The fund is a 3 year closed ended fund.•
The Asset Allocation pattern of the scheme •
would be as follows:

Debt securities and money market o
instruments, 80% to 100% of the
NAV.

E q u i t y  a n d  e q u i t y  r e l a t e d o
instruments, 0-20% of the NAV.

The scheme shall not make any investments •
in securitized debt and unrated debt
securities.
The proposed portfolio structure has been •
evaluated by ICRA1, a SEBI registered credit
rating agency from the view point of assessing
the degree of certainty for achieving the
objective of capital protection. The rating
would be reviewed on quarterly basis.

Protection Strategy
The scheme will follow a passive investment strategy for the fixed income portion. The •
fund manager will allocate the assets of the scheme between various fixed income
securities (that mature on or before the maturity of the scheme) with the objective of
protecting the capital at the time of maturity.
The allocation to fixed income securities shall be done to achieve the objective of capital •
protection.
The scheme shall not invest in debt securities rated below AAA or equivalent. The focus •
of the scheme is on capital protection rather than higher yields. As such, higher yielding
(i.e. lower rated) instruments (typically those having yield of more than 100 basis points
above the benchmark AAA yields as per CRISIL/ICRA) shall not be part of the investment
universe for the scheme.
The fund manager need not re-balance the equity investment provided the debt portion •
is sufficient to preserve the capital. Otherwise, the asset allocation will be decided in
consultation with the rating agency such that the debt portion will aim, at all times, to
preserve the capital.

Additional protection:
The Scheme may invest in various derivative instruments that are permissible under the •
applicable regulations, for hedging and portfolio balancing purposes.
Derivatives notional value should not exceed 75% of the fund’s NAV.• 2

Financial institution:	  The
fund is managed by Axis Asset
Management Company Limited.
Inception date:	  8th November
2011.
Investment Objective:	  is to
protect the capital by investing in a
portfolio of debt & money market
instruments that are maturing
on or before the maturity of the
Scheme. It also aims to provide
capital appreciation through
exposure in equity & equity related
instruments.
Type of assets:	  Mixed assets.

149Capital Protected Funds Survey

1  T
he

 U
ni

ts
 o

f t
he

 S
ch

em
e

ca
nn

ot
 b

e
re

de
em

ed
 b

y
th

e
U

ni
t h

ol
de

r
di

re
ct

ly
 w

ith
 th

e
Fu

nd
 u

nti
l t

he
 M

at
ur

ity
 D

at
e.

2  L

is
te

d
in

 N
ati

on
al

 S
to

ck
 E

xc
ha

ng
e

of
 In

di
a:

htt

p:
//

w
w

w
.n

se
in

di
a.

co
m

/

Pr
ofi

le
 s

um
m

ar
y



Fu
nd

 n
am

e
Ty

pe
 o

f a
ss

et
Ty

pe
 o

f
fu

nd

Su
bs

cr
ip

ti
on

/
Re

de
m

pti
on

 F

re
qu

en
cy

Pr
ot

ec
ti

on
 te

ch
ni

qu
e

Va
lu

ati
on

 M
et

ho
d

Se
co

nd
ar

y
 tr

ad
in

g

A
xi

s
Ca

pi
ta

l
Pr

ot
ec

ti
on

O

ri
en

te
d

Fu
nd

 -
Se

ri
es

 1

M
ix

ed
 a

ss
et

s:
Sa

fe
 a

ss
et

s:
 F

ix
ed

in

co
m

e
se

cu
ri

tie
s

in
cl

ud
in

g
m

on
ey

 m
ar

ke
t

in
st

ru
m

en
ts

, c
as

h
an

d
ca

sh
 e

qu
iv

al
en

t.
Ri

sk
y

as
se

ts
: E

qu
ity

.

Cl
os

ed
-

en
d1

N
/A

(A
nn

ua
l r

ep
or

t
no

t a
va

ila
bl

e)

1-
 In

ve
sti

ng
 in

 s
af

e
as

se
ts

:
Th

e
fu

nd
 a

do
pt

s
a

st
ati

c
he

dg
in

g
st

ra
te

gy
 b

y
ho

ld
in

g
to

 m
at

ur
ity

 h
ig

hl
y

ra
te

d
fix

ed
 in

co
m

e
se

cu
ri

tie
s

th
at

co

ns
tit

ut
e

80
%

 to
 1

00
%

 o
f t

he

N
AV

.
2-

 A
dd

iti
on

al
 p

ro
te

cti
on

:
Th

e
fu

nd
 is

 a
llo

w
ed

 to
 in

ve
st

in

 d
er

iv
ati

ve
s

to
 a

 li
m

ite
d

ex
te

nt
, f

or
 h

ed
gi

ng
 p

ur
po

se
s

on
ly

.

Th
e

N
AV

 is
 c

om
pu

te
d

at
 th

e
•

en
d

of
 e

ac
h

w
or

ki
ng

 d
ay

 in

ac
co

rd
an

ce
 w

ith
 S

EB
I r

eg
ul

ati
on

s.
Ye

s2

150 Capital Protected Funds Survey

Su
m

m
ar

y
of

 A
si

a
pr

ot
ec

te
d

fu
nd

s
su

rv
ey

c.

 Fu
nd

’s
 n

am
e

Ty
pe

 o
f a

ss
et

s
Ty

pe
 o

f
fu

nd

Su
bs

cr
ip

ti
on

/
Re

de
m

pti
on

 F

re
qu

en
cy

Pr
ot

ec
ti

on
 te

ch
ni

qu
e

Va
lu

ati
on

 M
et

ho
d

Se
co

nd
ar

y
 tr

ad
in

g

New Zealand

Li
on

ta
m

er

FA
LL

EN
 A

N
G

EL
S

Se
ri

es
1

(T
ru

st

26
)-

Bo
os

te
r

Eq
ui

ty
:

Ri
sk

y
as

se
t:

 E
qu

ity
 in

de
x

“F
al

le
n

A
ng

el
”

Cl
os

ed
N

/A
(A

nn
ua

l r
ep

or
t

no
t a

va
ila

bl
e)

A
 v

ar
ia

ti
on

 o
f 3

rd
 p

ar
ty

 p
ro

te
cti

on

ag
re

em
en

t:
a)

 T
he

 fu
nd

 b
uy

s
fin

an
ci

al
 a

ss
et

s
fr

om

a
Fu

nd
 a

ss
et

 P
ro

vi
de

r,
w

hi
ch

 is
 th

e
KB

C
Ba

nk
.

b)
 T

he
 fu

nd
 a

ss
et

 p
ro

vi
de

r
is

 li
ab

le

to
 p

ay
 in

de
x-

lin
ke

d
re

tu
rn

s
an

d
to

en

su
re

 9
0%

 c
ap

ita
l p

ro
te

cti
on

.

Va
lu

e
pr

io
r

to
 m

at
ur

it
y

•
:

Th
e

N
AV

 is
 c

al
cu

la
te

d
by

es

tim
ati

ng
 th

e
m

ar
ke

t
va

lu
e

of
 th

e
as

se
ts

. T
he

Fa

lle
n

A
ng

el
 in

de
x

is

es
tim

at
ed

 a
t m

ar
ke

t v
al

ue

ea
ch

 m
on

th
.

H
ol

d
to

 m
at

ur
it

y
•

Va
lu

ati
on

: r
ep

re
se

nt
s

w
ha

t t
he

 v
al

ue
 o

f e
ac

h
un

it
w

ou
ld

 b
e,

 a
ss

um
in

g
it

w
as

 m
at

ur
in

g
to

da
y

an
d

ha
d

be
en

 h
el

d
fo

r
th

e
fu

ll
te

rm
. I

t g
iv

es
 a

n
in

di
ca

tio
n

to
 th

e
in

ve
st

or
s

on
 h

ow

th
ei

r
un

its
 a

re
 p

er
fo

rm
in

g
at

 th
e

tim
e

of
 c

al
cu

la
tio

n.

Li
st

ed

in
 “

N
ew

Ze

al
an

d
D

eb
en

tu
re

s
Ex

ch
an

ge
”.

New Zealand

W
es

tp
ac

Ki

w
iS

av
er

-
Ca

pi
ta

l
Pr

ot
ec

ti
on

 P
la

n
1

M
ix

ed
 a

ss
et

s:
Ri

sk
y

as
se

ts
: N

ew

Ze
al

an
d,

 A
us

tr
al

ia
n

an
d

in
te

rn
ati

on
al

 s
ha

re
s.

Sa
fe

 a
ss

et
s:

 Z
er

o
co

up
on

bo

nd
s

or
 d

ep
os

its
.

O
pe

n-
en

de
d

N
/A

(A
nn

ua
l r

ep
or

t
no

t a
va

ila
bl

e)

A
 v

ar
ia

ti
on

 o
f C

PP
I:

A
ss

et
 a

llo
ca

tio
n

va
ri

es
 d

ep
en

di
ng

 o
n

m
ar

ke
t

co
nd

iti
on

s.
A

dd
iti

on
al

 p
ro

te
cti

on
:

Th
e

fu
nd

 tr
us

te
e

ap
po

in
ts

 a
 c

ap
ita

l
pr

ot
ec

tio
n

pr
ov

id
er

 in
 re

tu
rn

 fo
r

a
fe

e
(p

er
ce

nt
ag

e
of

 g
ro

w
th

 a
ss

et
s)

.

Th
e

M
an

ag
er

 w
ill

•

ge
ne

ra
lly

 c
al

cu
la

te
 a

 u
ni

t
pr

ic
e

ea
ch

 b
us

in
es

s
da

y,

w
hi

ch
 w

ill
 re

fle
ct

 th
e

m
ar

ke
t v

al
ue

 o
f a

ss
et

s,

le
ss

 a
ny

 li
ab

ili
tie

s.

Th
e

fu
nd

w

as
 fo

un
d

ne
ith

er
 in

N

ew
 Z

ea
la

nd

St
oc

k
ex

ch
an

ge

no
r

in

D
eb

en
tu

re
s

M
ar

ke
t.

151Capital Protected Funds Survey

Australia

In
ve

sc
o

W
ho

le
sa

le

Pr
ot

ec
te

d
G

ro
w

th

M
ix

ed
 a

ss
et

s:
Ri

sk
y

as
se

t:
 A

us
tr

al
ia

n
an

d
ov

er
se

as
 s

ha
re

s.

Sa
fe

 a
ss

et
s:

 C
as

h,

go
ve

rn
m

en
t a

nd

co
rp

or
at

e
fix

ed
 in

co
m

e.

O
pe

n-
en

de
d

N
um

be
r

of
 u

ni
ts

in

 ‘0
00

 a
s

at
 Ju

ne

20
11

:
Cr

ea
te

d:
 6

17
Ca

nc
el

le
d:

 2
,7

71
(s

ee
 th

e
no

te
)

A
 v

ar
ia

ti
on

 o
f C

PP
I:

a)
 A

ss
et

 a
llo

ca
tio

n
va

ri
es

 d
ep

en
di

ng
 o

n
m

ar
ke

t c
on

di
tio

ns
.

b)
 T

he
 p

ro
te

cti
on

 w
ith

in
 th

e
po

rtf
ol

io
 is

re

se
t e

ac
h

ye
ar

.
A

dd
iti

on
al

 p
ro

te
cti

on
:

Th
e

fu
nd

 m
ay

 h
av

e
re

co
ur

se
 to

 d
er

iv
ati

ve
s

fo
r

he
dg

in
g

pu
rp

os
es

.

U
ni

t p
ri

ce
s

ar
e

ge
ne

ra
lly

•

ca
lc

ul
at

ed
 e

ac
h

Bu
si

ne
ss

D

ay
Th

e
fu

nd
 o

pe
ra

te
s

ba
se

d
•

on
 F

or
w

ar
d

Pr
ic

in
g

m
et

ho
d.

Th
e

fu
nd

w

as
 n

ot

fo
un

d
in

 th
e

A
us

tr
al

ia
n

Se
cu

ri
tie

s
Ex

ch
an

ge

W
eb

si
te

.

Australia

M
ac

qu
ar

ie

W
in

to
n

G
lo

ba
l

O
pp

or
tu

ni
ti

es

Tr
us

t

M
ix

ed
 a

ss
et

s:
Fu

tu
re

s
co

nt
ra

ct
s

co
ve

ri
ng

 e
qu

iti
es

, fi
xe

d
in

co
m

e,
 c

om
m

od
iti

es

an
d

cu
rr

en
ci

es
.

Cl
os

ed

N
um

be
r

of
 u

ni
ts

in

 ‘0
00

 a
s

at
 3

0th

Ju
ne

 2
01

1:
Cr

ea
te

d:
 0

Ca
nc

el
le

d:
 3

,4
36

Ca
pi

ta
l P

ro
te

cti
on

 A
gr

ee
m

en
t i

s
pr

ov
id

ed

by
 th

e
Pr

ot
ec

tio
n

Pr
ov

id
er

 to
 S

ig
nu

m
 R

at
ed

II,

 ra
th

er
 th

an
 d

ire
ct

ly
 to

 th
e

Tr
us

t o
r

U
ni

t
ho

ld
er

s.
CP

PI
:

In
 o

rd
er

 to
 p

ro
vi

de
 C

ap
ita

l P
ro

te
cti

on
 a

t
th

e
Ca

pi
ta

l P
ro

te
cti

on
 D

at
e,

 th
e

Pr
ot

ec
tio

n
Pr

ov
id

er
 a

do
pt

s
a

dy
na

m
ic

 a
ss

et
 a

llo
ca

tio
n

w
ith

in
 th

e
Re

fe
re

nc
e

Po
rtf

ol
io

 d
ep

en
di

ng
 o

n
its

 p
er

fo
rm

an
ce

.

Th
e

offi
ci

al
 N

AV
 o

f t
he

•

Tr
us

t w
ill

 b
e

ca
lc

ul
at

ed

aft
er

 th
e

en
d

of
 e

ac
h

m
on

th
.

Th
e

N
AV

 o
f t

he
 T

ru
st

•

is
 e

qu
al

 to
 th

e
N

AV

of
 S

ig
nu

m
 B

lu
e

II’
s

ob
lig

ati
on

s
un

de
r

th
e

D
PA

an

d
is

 g
en

er
al

ly
 e

qu
al

 to

th
e

N
AV

 o
f t

he
 R

ef
er

en
ce

Se

cu
ri

tie
s.

Ye
s

Australia

Pr
e

Se
le

ct

10
0%

+
Ca

p
Pr

ot
ec

te
d

G
ro

w
th

1

M
ix

ed
 A

ss
et

s:
Sa

fe
 a

ss
et

s:
 C

as
h

D
ep

os
its

.
Ri

sk
y

as
se

ts
: D

W
S

M
ul

ti-
m

an
ag

er
 G

ro
w

th
 F

un
d

sh
ar

es
.

Cl
os

ed

N
/A

(A
nn

ua
l r

ep
or

t
no

t a
va

ila
bl

e)

CP
PI

:
Th

e
fu

nd
 d

yn
am

ic
al

ly
 a

llo
ca

te
s

its
 a

ss
et

s
ac

co
rd

in
g

to
 m

ar
ke

t m
ov

em
en

t,
 th

ou
gh

it

fa
vo

rs
 g

ro
w

th
 a

ss
et

s
as

 p
er

 th
e

fu
nd

ob

je
cti

ve
.

A
dd

iti
on

al
 P

ro
te

ct
ed

:
Th

e
fu

nd
 h

as
 re

co
ur

se
 to

 d
er

iv
ati

ve
s

to
 fa

ce

liq
ui

di
ty

 r
is

k
at

 th
e

m
at

ur
ity

 d
at

e.

U
ni

t p
ri

ce
s

ar
e

ge
ne

ra
lly

•

ca
lc

ul
at

ed
 o

n
th

e
la

st

bu
si

ne
ss

 d
ay

 o
f e

ac
h

m
on

th
 b

as
ed

 u
po

n
th

e
N

AV
 o

f t
he

 F
un

d
di

vi
de

d
by

 th
e

nu
m

be
r

of
 u

ni
ts

 o
n

is
su

e
in

 th
e

Fu
nd

.

Th
e

fu
nd

w

as
 n

ot

fo
un

d
in

 th
e

A
us

tr
al

ia
n

Se
cu

ri
tie

s
Ex

ch
an

ge

W
eb

si
te

.

152 Capital Protected Funds Survey

Australia

ST
RI

PE
S

G
lo

ba
l

Fi
na

nc
ia

l T
it

an
s

Eq
ui

ty
:

Ri
sk

y
as

se
t:

 D
ow

 Jo
ne

s
Ba

nk
s

Ti
ta

ns
 3

0
In

de
x.

Sa
fe

 a
ss

et
s:

 A
 n

oti
on

al

in
ve

st
m

en
t i

n
ca

sh

w
hi

ch
 e

ar
ns

 in
te

re
st

ba

se
d

on
 th

e
A

us
tr

al
ia

n
do

lla
r

sw
ap

 ra
te

s.

Cl
os

ed
N

/A
(A

nn
ua

l r
ep

or
t

no
t a

va
ila

bl
e)

CP
PI

:
a)

 In
ve

sti
ng

 in
 s

af
e

as
se

ts
 s

o
th

at

th
ei

r
fin

al
 v

al
ue

 p
lu

s
th

e
yi

el
d

is

eq
ui

va
le

nt
 to

 th
e

va
lu

e
of

 in
iti

al
 fu

nd

as
se

ts
.

b)
 In

ve
st

m
en

ts
 a

re
 m

or
e

to
w

ar
ds

 e
qu

ity

as
se

ts
: m

ax
im

um
 e

qu
ity

 e
xp

os
ur

e
is

20

0%
, i

ni
tia

l t
ar

ge
t e

qu
ity

 e
xp

os
ur

e
is

 e
sti

m
at

ed
 a

t 1
00

%
 a

nd
 th

e
m

in
im

um
 e

xp
os

ur
e

is
 2

0%
.

Th
e

N
AV

 o
f t

he
 fu

nd
s

•
is

 c
al

cu
la

te
d

ba
se

d
on

fo

rw
ar

d
pr

ic
in

g
on

 e
ac

h
bu

si
ne

ss
 d

ay
.

N
ot

 L
is

te
d

in
 th

e
A

us
tr

al
ia

n
Se

cu
ri

tie
s

Ex
ch

an
ge

Singapore

D
BS

 S
pr

in
t

Ca
pi

ta
l

Pr
ot

ec
te

d

Bo
nd

:
Sa

fe
 a

ss
et

s:
 A

co

m
bi

na
tio

n
of

 d
eb

t
se

cu
ri

tie
s

is
su

ed

by
 c

or
po

ra
tio

ns
,

go
ve

rn
m

en
ts

,
go

ve
rn

m
en

t a
ge

nc
ie

s
or

su

pr
an

ati
on

al
s.

--

N
um

be
r

of
 u

ni
ts

as

 a
t 3

0th
 Ju

ne

20
11

:
Cr

ea
te

d:
 0

Ca
nc

el
le

d:

40
8,

32
5

In
ve

sti
ng

 in
 s

af
e

as
se

ts
:

Pr
ot

ec
tio

n
is

 e
ns

ur
ed

 b
y

in
ve

sti
ng

 in
 d

eb
t

se
cu

ri
tie

s.

Th
e

N
AV

 o
f t

he
 fu

nd

•
is

 c
al

cu
la

te
d

ba
se

d
on

fo

rw
ar

d
pr

ic
in

g
an

d
is

pu

bl
is

he
d

ea
ch

 b
us

in
es

s
da

y.

Th
e

fu
nd

 w
as

no

t f
ou

nd
 in

Si

ng
ap

or
e

Ex
ch

an
ge

W

eb
si

te

Singapore

G
re

at
Li

nk

Ch
oi

ce
 (D

ec

20
13

)

Bo
nd

:
Sa

fe
 a

ss
et

s:
 “A

A”
 S

ig
nu

m

Pl
ati

nu
m

 L
im

ite
d

no
te

s.
O

pe
n-

en
de

d

N
/A

(A
nn

ua
l r

ep
or

t
no

t a
va

ila
bl

e)

In
ve

sti
ng

 in
 s

af
e

as
se

ts
:

Ca
pi

ta
l i

nv
es

te
d

le
ss

 c
ha

rg
es

 is
 in

ve
st

ed
 in

“A

A”
 n

ot
es

.
A

dd
iti

on
al

 P
ro

te
cti

on
:

To
 h

ed
ge

 a
ga

in
st

 d
iff

er
en

t r
is

ks
, t

he
 fu

nd

w
ill

 s
w

ap
 re

tu
rn

s
of

 th
e

SP
L

no
te

s
w

ith

G
ol

dm
an

 S
ac

hs
 In

te
rn

ati
on

al
 in

 a
 T

ot
al

Re

tu
rn

 S
w

ap
 A

gr
ee

m
en

t.

Th
e

N
AV

 o
f t

he
 fu

nd

•
is

 c
al

cu
la

te
d

ba
se

d
on

fo

rw
ar

d
pr

ic
in

g
on

 th
e

la
st

 b
us

in
es

s
da

y
of

 e
ac

h
m

on
th

.

Th
e

m
ot

he
r

co
m

pa
ny

 is

lis
te

d
bu

t t
he

fu

nd
 is

 n
ot

153Capital Protected Funds Survey

Malaysia
O

SK
-

U
O

B
Ca

pi
ta

l
Pr

ot
ec

te
d

G
ol

d
G

ur
u

Fu
nd

Bo
nd

:
Sa

fe
 a

ss
et

s:
 Z

er
o

Co
up

on
 N

eg
oti

ab
le

In

st
ru

m
en

ts
 o

f D
ep

os
its

an

d
liq

ui
d

as
se

ts
.

Ri
sk

y
as

se
ts

: O
TC

 c
al

l
op

tio
ns

 li
nk

ed
 to

 G
ol

d.

Cl
os

ed

N
um

be
r

of
 u

ni
ts

in

 ‘0
00

 a
s

at
 3

1st

M
ar

ch
 2

01
1:

Cr
ea

te
d:

 0
Ca

nc
el

le
d:

11

,2
50

Bo
nd

s
+

Ca
ll

op
ti

on
s:

 a

) T
o

pr
es

er
ve

 th
e

ca
pi

ta
l a

bo
ve

 8
8%

 o
f

ne
t a

ss
et

s
va

lu
e,

 it
 is

 in
ve

st
ed

 in
 z

er
o

co
up

on
 n

eg
oti

ab
le

 in
st

ru
m

en
ts

.
b)

 O
pti

on
s

ar
e

us
ed

 to
 g

en
er

at
e

re
tu

rn
s.

Th
e

N
AV

 c
al

cu
la

tio
n

is

•
ba

se
d

on
 fo

rw
ar

d
pr

ic
in

g.
Th

e
fu

nd
 v

al
ua

tio
n

is

•
co

nd
uc

te
d

ev
er

y
Fr

id
ay

.

Th
e

fu
nd

’s

na
m

e
do

es

no
t a

pp
ea

r
in

 li
st

ed

se
cu

ri
ty

 li
st

s.

Malaysia

RH
B

D
yn

am
ic

O

il-
G

ol
d

Ca
pi

ta
l

Pr
ot

ec
te

d

Bo
nd

:
Sa

fe
 a

ss
et

s:
 Z

er
o

Co
up

on
 N

eg
oti

ab
le

In

st
ru

m
en

ts
 o

f D
ep

os
its

an

d
liq

ui
d

as
se

ts
.

Ri
sk

y
as

se
ts

: O
TC

op

tio
ns

 li
nk

ed
 to

 O
il

an
d

G
ol

d.

O
pe

n-
en

de
d

N
/A

(A
nn

ua
l r

ep
or

t
no

t a
va

ila
bl

e)

Bo
nd

s
+

Ca
ll

op
ti

on
s:

 a

) T
o

pr
es

er
ve

 th
e

ca
pi

ta
l,

at
 le

as
t 8

5%

of
 n

et
 a

ss
et

s
va

lu
e

is
 in

ve
st

ed
 in

 z
er

o
co

up
on

 n
eg

oti
ab

le
 in

st
ru

m
en

ts
.

b)
 O

TC
 O

pti
on

s
lin

ke
d

to
 o

il
an

d
go

ld

pe
rf

or
m

an
ce

 a
re

 u
se

d
to

 g
en

er
at

e
re

tu
rn

s.

Th
e

fu
nd

 is
 v

al
ue

d
at

 fa
ir

•

va
lu

e
on

 d
ai

ly
 b

as
is

 a
nd

 in

co
m

pl
ia

nc
e

w
ith

 th
e

SC
’s

va

lu
ati

on
 g

ui
de

lin
es

.

Th
e

fu
nd

’s

do
es

 n
ot

ap

pe
ar

in

 li
st

ed

se
cu

ri
ty

 li
st

s.

Malaysia

PN
B

St
ru

ct
ur

ed

In
ve

st
m

en
t

M
ix

ed
 a

ss
et

s:
Ri

ng
gi

t-
de

no
m

in
at

ed

St
ru

ct
ur

ed
 P

ro
du

ct
s,

PN

B
RE

IT
, c

as
h

eq
ui

va
le

nt
 in

st
ru

m
en

ts
,

po
rtf

ol
io

 o
f l

is
te

d
se

cu
ri

tie
s,

 u
nl

is
te

d
se

cu
ri

tie
s

an
d

fix
ed

in

co
m

e
se

cu
ri

tie
s

in

M
al

ay
si

a
or

 a
ny

 o
th

er

El
ig

ib
le

 M
ar

ke
t.

Cl
os

ed
N

/A
(A

nn
ua

l r
ep

or
t

no
t a

va
ila

bl
e)

Em
be

dd
ed

 c
ap

it
al

 p
ro

te
cti

on
 in

po

rtf
ol

io
 c

om
po

ne
nt

s
:

 a
) S

tr
uc

tu
re

d
pr

od
uc

ts
 c

ap
ita

l
pr

ot
ec

tio
n

m
ec

ha
ni

sm
: C

om
bi

ne
s

sa
fe

 a
ss

et
s+

 o
pti

on
 s

tr
at

eg
y

an
d

D
yn

am
ic

 a
ss

et
 a

llo
ca

ti
on

 b
et

w
ee

n
sa

fe
 a

ss
et

s
an

d
un

de
rl

yi
ng

 a
ss

et
s.

b)
 P

N
B

RE
IT

 c
ap

ita
l p

ro
te

cti
on

m

ec
ha

ni
sm

: p
ro

pe
rti

es
 h

av
e

a
bu

y
ba

ck
 o

pti
on

 fr
om

 th
e

re
sp

ec
tiv

e
ve

nd
or

s.

Th
e

N
AV

 p
er

 U
ni

t i
s

•
co

m
pu

te
d

on
 F

or
w

ar
d

Pr
ic

in
g

ba
si

s
an

d
is

 d
ai

ly

pu
bl

is
he

d.

Th
e

fu
nd

’s

do
es

 n
ot

ap

pe
ar

in

 li
st

ed

se
cu

ri
ty

 li
st

s.

154 Capital Protected Funds Survey

Pakistan

Fa
ys

al
 S

av
in

gs

G
ro

w
th

 F
un

d

Bo
nd

:
Sa

fe
 a

ss
et

s:
 M

on
ey

m

ar
ke

t i
ns

tr
um

en
ts

 a
nd

go

ve
rn

m
en

t/
 p

ub
lic

 d
eb

t
se

cu
ri

tie
s.

O
pe

n-
en

de
d

N
um

be
r

of
 u

ni
ts

as

 a
t 3

0th
 Ju

ne

20
11

:
Cr

ea
te

d:

91
,1

73
,5

77
Ca

nc
el

le
d:

11

5,
46

7,
36

2

In
ve

sti
ng

 in
 s

af
e

as
se

ts
:

Th
e

fu
nd

 in
ve

st
s

pr
im

ar
ily

 in
 m

on
ey

 m
ar

ke
t

an
d

de
bt

 s
ec

ur
iti

es
 w

ith
 g

oo
d

cr
ed

it
ra

tin
g.

A
dd

iti
on

al
 p

ro
te

cti
on

:
Th

e
m

an
ag

er
 is

 a
llo

w
ed

 to
 in

ve
st

 in

de
ri

va
tiv

es
 fo

r
he

dg
in

g
pu

rp
os

es
.

Th
e

N
AV

 is
 c

al
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155Capital Protected Funds Survey

India
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156 Capital Protected Funds Survey

Survey of MENA Protected FundsX.

Funds screening - Methodology1.
Globally, there is an evident lack of data as far as MENA investment funds are •
concerned. Compared to their western counterparts (Morningstar or LipperLeader), the
fund databases – if available– are not comprehensive, as they do not mention all the
protected funds existing in the markets. They also do not provide the prospectuses and
annual reports for the few funds they list and no proper fund rating/ranking is given for
most of the funds.
To bypass this obstacle, we tried to collect the funds through the internet. The list is •
not meant to be comprehensive. It only mentions the funds we could find. Hence, the
ranking criteria could not be respected for MENA survey.
In this pre-selection, we emphasized on documentation availability (prospectuses, •
factsheets and annual reports) of the chosen funds. This helped us to focus our attention
on the funds with available information. For this particular category, we provided the
YTD return and the return since inception.
Sometimes, the funds are not domiciled in the MENA but the administrator is based in •
the region. Because of the limited number of capital protected funds, we decided to
consider this type as well.
Unless otherwise stated, the data are relative to December 2011.•

Survey’s selection2.

Fund’s name Documents
YTD

Return

Return
since

inception

Total net assets
(currency of

denomination)

Total net
assets ($
Million)

Bahrain Ahli United Bank- USD money market fund N/A X X X X

Bahrain GIC Gulf Bonds Fund Available 5.43% 3.83% 155.37 M USD1 155.37

Qatar
Commercial Bank of Qatar-Global Emerging Markets
Fund

N/A X X X X

Kuwait Watani US Real Estate Income & Growth Fund N/A X X X X

Kuwait Gulf Bond Fund N/A X X X X

Kuwait GIC KD Bonds Fund N/A X X X X

Kuwait Coast Pearl Fund Available -9.71% -22.10% N/A N/A

Kuwait Markaz Capital Preservation Portfolio Available X X N/A N/A

Cayman Al Mal MENA Income Fund Available -1.97% -0.30% N/A N/A

UAE Al Mal Liquidity Fund Available 2.57% 9.93% N/A N/A

UAE Rasmala Hedge Fund Strategies Fund N/A X X X X

Egypt CIB Hemaya Fund Available 3.03% 6.11% N/A N/A

Egypt Crédit Agricole Mutual fund number 4 ( Al Thiqa) Available N/A 2.01% N/A N/A

Egypt
Principal Bank for Development and Agricultural
Credit First Fund

Available 19.59% -9.72% 155 M EGP2 25.677

1 Source: Bloomberg, data are relative to 31st March 2012:
http://www.bloomberg.com/quote/GICBOND:KK
2 Total net assets on the inception date March 2008, Source:
http://www.efg-hermes.com/English/Services.aspx?PageID=216&expandable=1&li=8

157Capital Protected Funds Survey

1 Total net assets on the 1st July 2010, Source: http://english.mubasher.info/portal/CASE/getMutualFundOverView.ht
ml?mutualFundId=258&goToHomePageParam=true
2 Total net assets as of Q4 2011, Source:
http://www.axiscapital.com.tn/axis_gestion/upload/file/Reporting_AKP_T4_2011.pdf

Egypt
Principal Bank for Development and Agricultural
Credit First Fund

N/A X X X X

Egypt Banque Misr Accumulative Mutual Fund N/A X X X X

Egypt Arab Bank Egypt- Money Market Fund N/A X X X X

Egypt HSBC Money Maket Fund N/A X X X X

Egypt Al Watany bank of Egypt Mutual Fund N/A 0.49% 122.98% 100 M EGP1 16.57

Tunisia Axis Capital Protégé Available 2.93% 18.54% 16.0 M TND2 10.6

Tunisia FCP FINA 60 Available -1.21% 21.40% N/A N/A

Tunisia FCP Sécurité Available X X N/A N/A

N/A means that the documentation is not available. Hence it is impossible to get the rest of the information like the
YTD return: that is what “X” refers to.

Table 19: Pre-selection of MENA Capital Protected Funds

Final selection3.
Protected funds, whose documentations are available, are short listed for the survey •
based on their performance (The YTD and the Return since inception).
The number of funds to be studied depends on the financial activity of the country as •
well as on the funds’ performance.
Bahrain• : The sole fund whose documentation is available is the GIC Gulf Bonds Fund.
Besides, the GCC’s oldest and largest fixed income fund showed a consistent performance,
either in terms of YTD or return since inception.
Kuwait• : We included Markaz Capital. Though it is newly launched, the equity fund
where the capital protected fund invests was the recipient of many awards, namely
Lipper Reuters awards in 2007 & 2010 (for 3 years and 5 years performance).
UAE• : Only Al Mal Liquidity Fund was short listed because of the positive performance.
Egypt• : CIB Hemaya Fund has the best performance, followed by Crédit Agricole Mutual
fund number 4 - Al Thiqa.
Tunisia• : Though the three funds show satisfactory results, only “Axis Capital Protégé” is
included in the survey, due to the relatively small financial activity in Tunisia compared
to the other countries.

158 Capital Protected Funds Survey

Bahrain Kuwait UAE Egypt Tunisia

NAV Average

NAV Median

Number of Funds 1 5 2 8 3

U
SD

 M
ill

io
n

NAV Average NAV Median

0.00
20.00
40.00
60.00
80.00

100.00
120.00
140.00
160.00
180.00

155.37 0.00 0.00 21.13 5.34

155.37 0.00 0.00 21.13 5.34

A value of “0” means that the information was not available at the time of data collection.

Figure 13: MENA final selected capital protected funds aggregation

Fund’s name
YTD

Return
Return since

inception
Total net

assets
Type of assets

Bahrain GIC Gulf Bonds Fund 5.43% 3.83% 155.37 M USD Bond

Kuwait Markaz Capital Preservation Portfolio X X N/A Mixed assets

UAE Al Mal Liquidity Fund 2.57% 9.93% N/A Bond

Egypt Commercial International Bank Fund IV (Hemaya) 3.03% 6.11% N/A Mixed assets

Egypt Crédit Agricole Mutual fund number 4 (Al Thiqa) N/A 2.01% N/A Mixed assets

Tunisia Axis Capital Protégé 2.93% 18.54% 16.0 M TND Mixed assets

Table 20: Final selection of MENA Capital Protected Funds

159Capital Protected Funds Survey

1 www.zawya.com or www.gulfbase.com

Survey results4.

The approacha.

For each fund, we tried to collect the respective prospectus and the latest annual report, •
if available.
In the prospectus, we looked for information related to: type of fund, type of assets, •
protection strategy and fund valuation.
For the funds where the type of assets was not mentioned, we scrutinized the respective •
prospectus and some websites1 to confirm their asset allocation.
Normally, the redemption/subscription frequency is deduced from the annual report. •
Unfortunately for these particular funds, either the annual reports consolidate the
results of the respective mother companies and hence do not disclose the details of the
funds; or the annual report is simply not available online by any means.
Pertaining to secondary trading, we browse the respective stock exchange markets and •
check whether the ISIN code of the fund or its name is listed in the market. If so, we
consider that the fund’s units are traded in the secondary market, otherwise no.

160 Capital Protected Funds Survey

1 GIC Gulf Bond Fund Newsletter December 2011 and Prospectus of GIC Gulf Bond Fund edited on 18th
September 2011.

Funds’ profilesb.

GIC Gulf Bonds Fund

Investment strategy

Investment scope:
The fund is a total return bond portfolio that •
primarily invests in debt issues of entities
in GCC countries. Debt issues of entities
incorporated outside GCC countries may be
included on opportunistic basis.
The Investment Manager will invest at least •
75% of the Fund in the GCC Countries,
namely The Kingdom of Bahrain, State of
Kuwait, Sultanate of Oman, State of Qatar,
The Kingdom of Saudi Arabia and the United
Arab Emirates. The Investment Manager will
invest the rest outside the G.C.C. (including
in OECD Countries and Emerging Markets).

Type of assets:
All sectors of the bond market will be utilized to add value including:

Debt instruments issued by governments and government agencies;o

Debt instruments issued by corporate and financial institutions;o

Asset backed securities;o

Shari’ah compliant debt and money market instruments;o

Conventional money market instruments;o

The fund may also invest in third party funds or structured instruments and o
vehicles.

Protection strategy:
The protection is based on the nature of the assets held by the fund. Furthermore, there
are some restrictions on the type of bonds the fund may invest in:

Up to 100% of the NAV could be invested in government and sovereign bonds.o

A maximum of 60% of the NAV could be invested in corporate and financial o
institutions debt instruments.

The Fund may invest in third party investment funds or other vehicles up to 40% o
of the NAV.

Additional protection:
The Fund may invest in derivative transactions related to interest rates or foreign •
exchange for hedging purposes.
To limit the currency risk, the fund imposes currency restrictions on its investments. •
These should be, preferably, tradable and valued in the local currency, currency of GCC
Countries or other main tradable currencies.1

Financial institution:	  The fund
is managed by Al Mal Capital
PSC; an institution specialized
in investment banking, asset
management and brokerage.
Inception date:	  5th April 2009.
Investment Objective:	  Al Mal
Liquidity Fund is an open-ended
fund registered in the United Arab
Emirates. The aim of the Fund is
to provide investors with capital
preservation and current income
through regular payment of
dividends. The Fund invests in UAE
and GCC short-term money market
and deposit instruments.
Type of assets:	  Bonds.

161Capital Protected Funds Survey

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s.

M
on

th
ly

 v
al

ua
tio

n:
 T

he
 fi

rs
t d

ay

•
of

 e
ac

h
m

on
th

 p
ro

vi
de

d
it

is
 a

Bu

si
ne

ss
 D

ay

Th
e

M
ot

he
r

Co
m

pa
ny

 is

lis
te

d
in

 B
ah

ra
in

St

oc
k

Ex
ch

an
ge

,
bu

t t
he

 fu
nd

 w
as

no
t f

ou
nd

.1

162 Capital Protected Funds Survey

Markaz Capital Preservation Portfolio

Investment strategy

The need for Markaz Capital Preservation
Portfolio:

Market volatility• : Over the last few years, the
Kuwait Stock Exchange has underperformed
against other emerging markets and has
demonstrated a high level of volatility.
Lack of liquidity• : In 2009, liquidity in the
Kuwait Stock Exchange dried up drastically,
with a total value traded of only USD 75
billion, having previously peaked at over USD
130 billion in 2007 and 2008.
Rising Speculation• : Because of the lower
liquidity, speculation at the Kuwait Stock
Exchange has been very high since 2009,
leading to high levels of volatility in the
Kuwait market.
Low level of participation by institutional •
investors: This stood at only 4% in 2009,
hence contributing to rising speculation.

Protection strategy: CPPI
By means of the CPPI Model, Markaz is •
attempting to limit any downside to 10% of the original investment, while offering
an opportunity to benefit from the upside through participation in the Kuwaiti equity
market.

Type of assetso

Equity Benchmark: The fund invests in Blue Chip Equity Stocks listed on the Kuwait stock •
exchange and was the best performing fund in Kuwait in 2009: Markaz Fund for Excellent
Yields “Mumtaz”.
Safe assets: Fixed Deposits with local banks.•

CPPI Parameters:o

The floor= 90: The value of net assets of the fund is not expected to fall below 90% of •
the initial value.
Multiplier= 3.5: Higher multiplier will enable the manager to allocate higher levels to •
equity during rising markets and vice versa.

Financial institution:	  The fund
is managed by Kuwait Financial
Centre, S.A.K. ‘Markaz’ an asset
management and investment
banking institution.
Inception date:	  1st November
2010.
Investment Objective:	  To seek
Without any promises or any
guarantee by the Portfolio
Manager, the Portfolio attempts
on a best efforts basis to achieve
capital appreciation over a
medium- to long-term period
(based on an investment horizon
of 2 to 3 years at the minimum)
by investing in “Mumtaz” (Markaz
equity fund for high yields) with a
goal to preserve 90% of the capital
invested at inception.
Type of assets:	  Mixed assets.

163Capital Protected Funds Survey

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.p
df

Pr
ofi

le
 s

um
m

ar
y



Fu
nd

 n
am

e
Ty

pe
 o

f a
ss

et
Ty

pe
 o

f
fu

nd

Su
bs

cr
ip

ti
on

/
Re

de
m

pti
on

 F

re
qu

en
cy

Pr
ot

ec
ti

on
 te

ch
ni

qu
e

Va
lu

ati
on

 M
et

ho
d

Se
co

nd
ar

y
 tr

ad
in

g

M
ar

ka
z

Ca
pi

ta
l

Pr
es

er
va

ti
on

Po

rtf
ol

io

M
ix

ed
 a

ss
et

s:
Ri

sk
y

as
se

t:
 In

ve
sti

ng
 in

“M

um
ta

z”
 e

qu
ity

.
Sa

fe
 a

ss
et

s:
 C

as
h

de
po

si
ts

 w
ith

 lo
ca

l
ba

nk
s.

O
pe

n-
en

de
d

N
/A

CP
PI

: w
ith

 a
 fl

oo
r

of
 9

0
an

d
a

m
ul

tip
lie

r
of

 3
.5

N

/A

Th
e

m
ot

he
r

co
m

pa
ny

is

 li
st

ed
 o

n
th

e
Ku

w
ai

t
St

oc
k

Ex
ch

an
ge

 b
ut

 th
e

Fu
nd

 w
as

 n
ot

 fo
un

d.
1

N
ot

es

	 Th

e
in

fo
rm

ati
on

 p
re

se
nt

ed
 in

 th
e

an
nu

al
 r

ep
or

t o
f 2

01
0

is
 in

 th
e

fo
rm

 o
f c

on
so

lid
at

ed
 re

su
lts

. T
he

 fi
na

nc
ia

l p
er

fo
rm

an
ce

 o
f t

he
 re

sp
ec

tiv
e

•
fu

nd
s

is
 n

ot
 a

va
ila

bl
e

on
lin

e.
W

e
co

ul
d

no
t p

ro
vi

de
 th

e
va

lu
ati

on
 m

et
ho

d
si

nc
e

w
e

w
er

e
un

ab
le

 to
 fi

nd
 th

e
fu

nd
 p

ro
sp

ec
tu

s.
 M

os
t o

f t
he

 in
fo

rm
ati

on
 p

re
se

nt
ed

 a
bo

ve

•
ha

s
be

en
 g

at
he

re
d

fr
om

 th
e

fu
nd

 b
ro

ch
ur

e
an

d
th

e
offi

ci
al

 w
eb

si
te

.2

164 Capital Protected Funds Survey

1 Sources:
Factsheet: http://www.almalcapital.com/files/Al%20Mal%20Investment%20Funds%27%20Fact%20Sheets%20-%20
September%202012.pdf#page=7
Prospectus: http://www.almalcapital.com/files/Al%20Mal%20Liquidity%20Fund%20%20%28AED%29%20
Prospectus.pdf

Al Mal Liquidity Fund

Investment strategy

The Fund is very recent. It is still in the
development stage with no operating history
and is therefore difficult to evaluate. The
success of the Fund and its ability to generate
profits and protect capital will depend on the
management and the financial and managerial
expertise of the Fund Manager.

Protection strategy:
The protection is based on the nature of the •
assets held by the fund: more than 80% of
the portfolio is invested in short term money
market and deposit instruments.

Further protection:
The Fund Manager may, at his absolute •
discretion, invest in derivatives to manage
the interest rate risk and others for efficient
portfolio management but may not do so
solely for speculative purposes1.

Financial institution:
The fund is managed by 	 Al
Mal Capital PSC; an institution
specialized in investment banking,
asset management and brokerage.
Inception date:	  5th April 2009.
Investment Objective:	  Al Mal
Liquidity Fund is an open-ended
fund registered in the United Arab
Emirates. The aim of the Fund is
to provide investors with capital
preservation and current income
through regular payment of
dividends. The Fund invests in UAE
and GCC short-term money market
and deposit instruments.
Type of assets:	  Bonds.

165Capital Protected Funds Survey

1  D
ub

ai
 F

in
an

ci
al

 m
ar

ke
t,

 li
st

ed
 m

ut
ua

l f
un

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tt
p:

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ge

s/
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=1
02

0
A

bu
 D

ha
bi

 s
ec

ur
iti

es
 e

xc
ha

ng
e,

 li
st

ed
 fu

nd
s:

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tt

p:
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w
w

w
.a

dx
.a

e/
En

gl
is

h/
Se

cu
ri

tie
s/

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ge

s/
In

ve
st

m
en

tF
un

ds
.a

sp
x

Pr
ofi

le
 s

um
m

ar
y



Fu
nd

 n
am

e
Ty

pe
 o

f a
ss

et
Ty

pe
 o

f
fu

nd

Su
bs

cr
ip

ti
on

/
Re

de
m

pti
on

 F

re
qu

en
cy

Pr
ot

ec
ti

on
 te

ch
ni

qu
e

Va
lu

ati
on

 M
et

ho
d

Se
co

nd
ar

y
 tr

ad
in

g

A
l M

al
 L

iq
ui

di
ty

Fu

nd

Bo
nd

s:
Sa

fe
 a

ss
et

s:
 A

t l
ea

st

80
%

 o
f t

he
 p

or
tf

ol
io

is

 in
ve

st
ed

 in
 s

ho
rt

te

rm
 m

on
ey

 m
ar

ke
t

in
st

ru
m

en
ts

 a
nd

de

po
si

ts
.

O
pe

n-
en

de
d

N
/A

In
ve

sti
ng

 in
 s

af
e

as
se

ts
:

a)
 P

ro
te

cti
on

 is
 e

ns
ur

ed
 b

y
in

ve
sti

ng
 in

 re
la

tiv
el

y
sa

fe

as
se

ts
.

b)
 D

er
iv

ati
ve

s
ar

e
fu

rt
he

r
us

ed

to
 h

ed
ge

 in
te

re
st

 ra
te

 r
is

k
an

d
cu

rr
en

cy
 r

is
k.

Th
e

N
AV

 o
f t

he
 fu

nd
 is

 c
al

cu
la

te
d

•
ba

se
d

on
 fo

rw
ar

d
pr

ic
in

g.

M
or

e
sp

ec
ifi

ca
lly

, t
he

 N
AV

 if
 th

e
•

Fu
nd

 is
 e

qu
al

 to
 th

e
su

m
 o

f a
ll

ca
sh

, c
as

h
eq

ui
va

le
nt

s,
 th

e
fa

ir

va
lu

e
of

 a
ll

ot
he

r
as

se
ts

 o
f t

he

Fu
nd

, l
es

s
al

l l
ia

bi
liti

es
 o

f t
he

Fu

nd
, i

nc
lu

di
ng

 a
cc

ru
ed

 li
ab

ili
tie

s,

ir
re

sp
ec

tiv
e

of
 w

he
th

er
 s

uc
h

lia
bi

liti
es

 m
ay

 in
 fa

ct
 n

ev
er

 b
e

pa
id

.

Th
e

fu
nd

 is

ne
ith

er
 li

st
ed

on

 th
e

D
ub

ai

Fi
na

nc
ia

l M
ar

ke
t,

no

r
on

 th
e

A
bu

D

ha
bi

 S
ec

ur
iti

es

Ex
ch

an
ge

1

166 Capital Protected Funds Survey

1 Website: http://www.cibeg.com/en/ConsumerBanking/Investments/Pages/HemayaFund.aspx
2 Sources:
Prospectus :http://www.cibeg.com/en/ConsumerBanking/Investments/PublishingImages/Hemaya%20
Prospectus%2011-07-10.pdf
Factsheet: http://www.cibeg.com/en/ConsumerBanking/Investments/PublishingImages/HEMAYA%20Fund%20
fact%20sheet-November%202011.pdf

Commercial International Bank Fund IV
(Hemaya)

Investment strategy

Hemaya Fund is the first in the Egyptian market
with full Capital Protection, with a short tenor
of 1 year, and monthly subscriptions and
redemptions.

Type of assets:
Hemaya provides diversification through •
investing in the following financial
instruments:

Fixed income securities: T-Bills, o
T-Bonds, Deposits, Bond Repos.

Investments in other funds: mutual o
funds, money market and fixed
income funds. Up to 20% of the NAV
could be invested in such assets.

Equity: Up to 25% of the fund could o
be invested in local equity.1

Protection strategy: A variation of CPPI
The fund invests in both fixed income securities and in equities. To protect the capital, •
the fixed income portion is used as a hedging mechanism to protect against the equity
portion.
The bulk of the assets are invested in liquid fixed income instruments while equity •
component should not exceed 25% of the portfolio.
If the value of the equity drops by 20%, the whole portfolio will be invested in fixed •
income instruments.
Additionally, of the return on equity component will be invested in fixed income •
securities, in order to maintain the 25% threshold.2

Financial institution:	  The
fund is managed by CI Asset
Management.
Inception date:	  1st August 2010
Investment Objective:	  The
fund aims to attract investors in
both fixed income and equity
instruments. The fund enables
both retail and corporate investors
to benefit from the upside potential
in the capital markets without
being exposed to capital loss by
protecting the capital invested.
Type of assets: 	 Mixed assets.

167Capital Protected Funds Survey

Pr
ofi

le
 s

um
m

ar
y



Fu
nd

 n
am

e
Ty

pe
 o

f a
ss

et
Ty

pe
 o

f
fu

nd

Su
bs

cr
ip

ti
on

/
Re

de
m

pti
on

 F

re
qu

en
cy

Pr
ot

ec
ti

on
 te

ch
ni

qu
e

Va
lu

ati
on

 M
et

ho
d

Se
co

nd
ar

y
 tr

ad
in

g

Co
m

m
er

ci
al

In

te
rn

ati
on

al
 B

an
k

Fu
nd

 IV
 (H

em
ay

a)

M
ix

ed
 a

ss
et

s:
Sa

fe
 a

ss
et

s:
 T

he
 m

aj
or

ity

of
 th

e
fu

nd
 is

 in
ve

st
ed

in

 T
-b

ill
s,

 T
-b

on
ds

, b
on

d
re

po
s

an
d

de
po

si
t.

Ri
sk

y
as

se
ts

: L
oc

al

eq
ui

ty
 (u

p
to

 2
5%

).

O
pe

n-
en

de
d

N
/A

A
 v

ar
ia

ti
on

 o
f C

PP
I:

a)
 F

ix
ed

 in
co

m
e

in
st

ru
m

en
ts

 a
re

us

ed
 a

s
he

dg
e

ag
ai

ns
t e

qu
ity

po

si
tio

n.

b)
 T

he
 fu

nd
 li

m
its

 th
e

ri
sk

 b
y

lim
iti

ng
 th

e
ex

po
su

re
 to

eq

ui
ty

 (u
p

to
 2

5%
 o

f t
he

 N
AV

)
c)

 T
he

 p
or

tf
ol

io
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om
po

si
tio

n
va

ri
es

 a
cc

or
di

ng
 to

 m
ar

ke
t

co
nd

iti
on

s.

Th
e

N
AV

 o
f t

he
 fu

nd
 is

 c
al

cu
la

te
d

•
ba

se
d

on
 fo

rw
ar

d
pr

ic
in

g.

N
o

168 Capital Protected Funds Survey

1 Sources:
Prospectus: http://www.ca-egypt.com/PB/InvestP/CAE-MF4_Prospectus-AR.pdf
Factsheet: http://www.ca-egypt.com/f-info/mfund/CAE-MF4_AlThiqa-Nov2011-en.pdf
Website:
http://www.ca-egypt.com/PB/InvestP/CAEMFno4.html

Crédit Agricole Mutual fund number
4 (Al Thiqa)

Investment strategy

The fund’s investments are restricted to the •
local Egyptian market and are undertaken in
local currency.
The fund diversifies its investments between •
high-risk instruments such as equities and
low risk instruments, as well as diversifying
across different economic sectors and the
use of prudent instrument selection for all
instruments.

Protection strategy: A variation of CPPI
The fund is of moderate risk as the •
investments are balancing between stock
and fixed income; depending on market
conditions.
The fund manager can invest according to •
the following main criteria:

Stocks range between 35% and 65% o
of the fund’s Net Asset Value (NAV).

Fixed income ranges between 35% up to a maximum of 65% of the NAV. This o
income includes Time deposits, call accounts, Egyptian Treasury Bills/Bonds,
Corporate bonds.1

Financial institution:	  The fund
custodian is Crédit Agricole Egypt.
Inception date:	  8th August 2011.
Investment Objective:	  (i) Capital
preservation (ii) Achieve moderate
growth with moderate risk by
balancing its investments between
stock and fixed income products
(iii) Periodic income and prizes.
Type of assets:	  Mixed assets.

169Capital Protected Funds Survey

Pr
ofi

le
 s

um
m

ar
y



Fu
nd

 n
am

e
Ty

pe
 o

f a
ss

et
Ty

pe
 o

f
fu

nd

Su
bs

cr
ip

ti
on

/
Re

de
m

pti
on

 F

re
qu

en
cy

Pr
ot

ec
ti

on
 te

ch
ni

qu
e

Va
lu

ati
on

 M
et

ho
d

Se
co

nd
ar

y
 tr

ad
in

g

Cr
éd

it
 A

gr
ic

ol
e

M
ut

ua
l f

un
d

nu
m

be
r

4
(A

l
Th

iq
a)

M
ix

ed
 A

ss
et

:
Sa

fe
 a

ss
et

s:
 T

-B
ill

s,
 T

-B
on

ds
,

co
rp

or
at

e
bo

nd
s,

 d
ep

os
its

…
Ri

sk
y

as
se

t:
 L

oc
al

 E
qu

ity
.

O
pe

n-
en

de
d

N
/A

A
 v

ar
ia

ti
on

 o
f C

PP
I:

a)
 T

he
 fu

nd
 in

ve
st

s
in

 b
ot

h
eq

ui
ty

 a
nd

fix

ed
 in

co
m

e.
b)

 T
he

 p
or

tio
n

of
 e

qu
ity

 a
nd

 b
on

ds

co
m

po
ne

nt
s

de
pe

nd
s

on
 m

ar
ke

t
co

nd
iti

on
s

(b
ot

h
sh

ou
ld

 v
ar

y
be

tw
ee

n
35

%
 a

nd
 6

5%
)

N
/A

N
o

170 Capital Protected Funds Survey

1 Sources:
Prospectus: http://ae.zawya.com/researchreports/p_2006_10_19_10_26_01/20100409_p_2006_10_19_10_26_01
_094918.pdf
Factsheet: http://www.axis.com.tn/axis_gestion/upload/file/Reporting_ACP_T1_2011.pdf
Website: http://www.axiscapital.com.tn/axis_gestion/axis_bourse_axis_produit.php?codpor=FCP%20AKP

Axis Capital Protégé

Investment strategy

Protection strategy:
The portfolio is constituted of mixed assets: •
medium to long term fixed income securities
(T-bills, Bonds, deposits) and stocks traded in
the Tunisian market.
The capital protection is ensured by investing •
the bulk of the assets in high quality fixed
income investments.
The fund invests in medium to long term fixed •
income assets while it limits its exposure to
equity:

About 45% of total assets is allocated o
to public and private bonds.

About 20% is held in cash or cash o
equivalent.

About 5% is invested in other in o
mutual funds.

About 30% is allocated to high yield local equity.o 1

Financial institution:	  The fund is
managed by Axis Capital Gestion.
Inception date:	  February 2004.
Investment Objective:	  To achieve
medium to long term capital
appreciation while preserving
capital.
Type of assets	 : Mixed assets.

171Capital Protected Funds Survey

Pr
ofi

le
 s

um
m

ar
y



Fu
nd

 n
am

e
Ty

pe
 o

f a
ss

et
Ty

pe
 o

f
fu

nd

Su
bs

cr
ip

ti
on

/
Re

de
m

pti
on

 F

re
qu

en
cy

Pr
ot

ec
ti

on
 te

ch
ni

qu
e

Va
lu

ati
on

 M
et

ho
d

Se
co

nd
ar

y
 tr

ad
in

g

A
xi

s
Ca

pi
ta

l
Pr

ot
ég

é

M
ix

ed
 a

ss
et

s:
Ri

sk
y

as
se

t:
 L

es
s

th
an

40

%
 is

 h
el

d
in

 lo
ca

l
eq

ui
tie

s.
Sa

fe
 a

ss
et

s:
 P

ub
lic

 &

pr
iv

at
e

de
bt

 in
st

ru
m

en
t,

ca

sh
 a

nd
 c

as
h

eq
ui

va
le

nt
.

O
pe

n-
en

de
d

N
/A

In
ve

sti
ng

 in
 s

af
e

as
se

ts
:

 a
) T

he
 fu

nd
 in

ve
st

s
th

e
m

aj
or

ity

of
 th

e
po

rtf
ol

io
 in

 h
ig

h
qu

al
ity

sa

fe
 a

ss
et

s.
b)

 R
et

ur
ns

 a
re

 g
en

er
at

ed
 b

y
hi

gh
 y

ie
ld

 s
ec

ur
iti

es
 w

hi
ch

 is

lim
ite

d
to

 4
0%

 o
f t

ot
al

 a
ss

et
s.

Th
e

N
AV

 o
f t

he
 fu

nd
 b

as
ed

 o
n

•
fo

rw
ar

d
pr

ic
in

g
an

d
th

e
va

lu
ati

on

of
 th

e
as

se
ts

 a
nd

 li
ab

ili
tie

s
ar

e
su

bj
ec

t t
o

lo
ca

l a
cc

ou
nti

ng
 r

ul
es

.
Th

e
N

AV
 is

 c
al

cu
la

te
d

on
 a

 w
ee

kl
y

•
ba

si
s

an
d

pu
bl

is
he

d
ea

ch
 F

ri
da

y.

N
o

172 Capital Protected Funds Survey

Su
m

m
ar

y
of

 M
E

N
A

 p
ro

te
ct

ed
 f

un
ds

 s
ur

ve
y

c.

Fu
nd

 n
am

e
Ty

pe
 o

f a
ss

et
Ty

pe
 o

f
fu

nd

Su
bs

cr
ip

tio
n/

Re

de
m

pti
on

 F

re
qu

en
cy

Pr
ot

ec
ti

on
 te

ch
ni

qu
e

Va
lu

ati
on

 M
et

ho
d

Se
co

nd
ar

y
 tr

ad
in

g

Bahrain

G
IC

 G
ul

f B
on

ds

Fu
nd

Bo
nd

s:

Sa
fe

 a
ss

et
s:

 G
ov

er
nm

en
t

/
co

rp
or

at
e

de
bt

se

cu
ri

tie
s

an
d

m
on

ey

m
ar

ke
t i

ns
tr

um
en

ts
.

O
pe

n-
en

de
d

N
/A

In
ve

sti
ng

 in
 s

af
e

as
se

ts
:

a)
 P

ro
te

cti
on

 is
 e

ns
ur

ed
 b

y
in

ve
sti

ng
 in

 re
la

tiv
el

y
sa

fe
 a

ss
et

s.
b)

 D
er

iv
ati

ve
s

ar
e

fu
rt

he
r

us
ed

 to
 h

ed
ge

 in
te

re
st

ra

te
 r

is
k

an
d

cu
rr

en
cy

ri

sk
.

Th
e

N
AV

 p
er

 U
ni

t w
ill

 b
e

•
ca

lc
ul

at
ed

 b
y

th
e

A
dm

in
is

tr
at

or

in
 a

cc
or

da
nc

e
w

ith
 g

en
er

al
ly

ac

ce
pt

ed
 in

te
rn

ati
on

al
 a

cc
ou

nti
ng

st

an
da

rd
s.

M
on

th
ly

 v
al

ua
tio

n:
 T

he
 fi

rs
t d

ay

•
of

 e
ac

h
m

on
th

 p
ro

vi
de

d
it

is
 a

Bu

si
ne

ss
 D

ay

Th
e

M
ot

he
r

Co
m

pa
ny

 is

lis
te

d
in

 B
ah

ra
in

St

oc
k

Ex
ch

an
ge

,
bu

t t
he

 fu
nd

 w
as

no

t f
ou

nd
.

Kuwait

M
ar

ka
z

Ca
pi

ta
l

Pr
es

er
va

ti
on

Po

rtf
ol

io

M
ix

ed
 a

ss
et

s:

Ri
sk

y
as

se
t:

 In
ve

sti
ng

 in

“M
um

ta
z”

 e
qu

ity
.

Sa
fe

 a
ss

et
s:

 c
as

h
de

po
si

ts
 w

ith
 lo

ca
l

ba
nk

s.

O
pe

n-
en

de
d

N
/A

CP
PI

: w
ith

 a
 fl

oo
r

of
 9

0
an

d
a

m
ul

tip
lie

r
of

 3
.5

N

/A

Th
e

m
ot

he
r

co
m

pa
ny

 is
 li

st
ed

on

 th
e

Ku
w

ai
t

St
oc

k
Ex

ch
an

ge

bu
t t

he
 F

un
d

w
as

 n
ot

 fo
un

d.

UAE

A
l M

al
 L

iq
ui

di
ty

Fu

nd

Bo
nd

s:

Sa
fe

 a
ss

et
s:

 A
t l

ea
st

80

%
 o

f t
he

 p
or

tf
ol

io

is
 in

ve
st

ed
 in

 s
ho

rt

te
rm

 m
on

ey
 m

ar
ke

t
in

st
ru

m
en

ts
 a

nd

de
po

si
ts

.

O
pe

n-
en

de
d

N
/A

In
ve

sti
ng

 in
 s

af
e

as
se

ts
:

a)
 P

ro
te

cti
on

 is
 e

ns
ur

ed
 b

y
in

ve
sti

ng
 in

 re
la

tiv
el

y
sa

fe
 a

ss
et

s.
b)

 D
er

iv
ati

ve
s

ar
e

fu
rt

he
r

us
ed

 to
 h

ed
ge

 in
te

re
st

ra

te
 r

is
k

an
d

cu
rr

en
cy

ri

sk
.

Th
e

N
AV

 o
f t

he
 fu

nd
 is

 c
al

cu
la

te
d

•
ba

se
d

on
 fo

rw
ar

d
pr

ic
in

g.

M
or

e
sp

ec
ifi

ca
lly

, t
he

 N
AV

 if
 th

e
•

Fu
nd

 is
 e

qu
al

 to
 th

e
su

m
 o

f a
ll

ca
sh

, c
as

h
eq

ui
va

le
nt

s,
 th

e
fa

ir

va
lu

e
of

 a
ll

ot
he

r
as

se
ts

 o
f t

he

Fu
nd

, l
es

s
al

l l
ia

bi
liti

es
 o

f t
he

Fu

nd
, i

nc
lu

di
ng

 a
cc

ru
ed

 li
ab

ili
tie

s,

ir
re

sp
ec

tiv
e

of
 w

he
th

er
 s

uc
h

lia
bi

liti
es

 m
ay

 in
 fa

ct
 n

ev
er

 b
e

pa
id

.

Th
e

fu
nd

 is

ne
ith

er
 li

st
ed

on

 th
e

D
ub

ai

Fi
na

nc
ia

l M
ar

ke
t,

no

r
on

 th
e

A
bu

D

ha
bi

 S
ec

ur
iti

es

Ex
ch

an
ge

.

173Capital Protected Funds Survey

Egypt

Co
m

m
er

ci
al

In

te
rn

ati
on

al
 B

an
k

Fu
nd

 IV
 (H

em
ay

a)

M
ix

ed
 a

ss
et

s:
Sa

fe
 a

ss
et

s:
 T

he
 m

aj
or

ity

of
 th

e
fu

nd
 is

 in
ve

st
ed

in

 T
-b

ill
s,

 T
-b

on
ds

, b
on

d
re

po
s

an
d

de
po

si
t.

Ri
sk

y
as

se
ts

: L
oc

al

eq
ui

ty
 (u

p
to

 2
5%

)

O
pe

n-
en

de
d

N
/A

A
 v

ar
ia

ti
on

 o
f C

PP
I:

1-
 F

ix
ed

 in
co

m
e

in
st

ru
m

en
ts

 a
re

 u
se

d
as

 h
ed

ge
 a

ga
in

st
 e

qu
ity

po

si
tio

n.

2-
 T

he
 fu

nd
 li

m
its

 th
e

ri
sk

by

 li
m

iti
ng

 th
e

ex
po

su
re

to

 e
qu

ity
 (u

p
to

 2
5%

 o
f

th
e

N
AV

)
3-

 T
he

 p
or

tf
ol

io

co
m

po
si

tio
n

va
ri

es

ac
co

rd
in

g
to

 m
ar

ke
t

co
nd

iti
on

s.

Th
e

N
AV

 o
f t

he
 fu

nd
 is

 c
al

cu
la

te
d

•
ba

se
d

on
 fo

rw
ar

d
pr

ic
in

g.
N

o

Egypt

Cr
éd

it
 A

gr
ic

ol
e

M
ut

ua
l f

un
d

nu
m

be
r

4
(A

l T
hi

qa
)

M
ix

ed
 A

ss
et

:
Sa

fe
 a

ss
et

s:
 T

-B
ill

s,

T-
Bo

nd
s,

 c
or

po
ra

te

bo
nd

s,
 d

ep
os

its
…

Ri
sk

y
as

se
t:

 L
oc

al
 E

qu
ity

.

O
pe

n-
en

de
d

N
/A

A
 v

ar
ia

ti
on

 o
f C

PP
I:

1-
 T

he
 fu

nd
 in

ve
st

s
in

 b
ot

h
eq

ui
ty

 a
nd

 fi
xe

d
in

co
m

e.
2-

 T
he

 p
or

tio
n

of
 e

qu
ity

an

d
bo

nd
s

co
m

po
ne

nt
s

de
pe

nd
s

on
 m

ar
ke

t
co

nd
iti

on
s

(b
ot

h
sh

ou
ld

va

ry
 b

et
w

ee
n

35
%

 a
nd

65

%
)

N
/A

N
o

Tunisia

A
xi

s
Ca

pi
ta

l P
ro

té
gé

M
ix

ed
 a

ss
et

s:
Ri

sk
y

as
se

t:
 L

es
s

th
an

40

%
 o

f a
ss

et
s

is
 h

el
d

in

lo
ca

l e
qu

iti
es

.
Sa

fe
 a

ss
et

s:
 P

ub
lic

 &

pr
iv

at
e

de
bt

 in
st

ru
m

en
t,

ca

sh
 a

nd
 c

as
h

eq
ui

va
le

nt
.

O
pe

n-
en

de
d

N
/A

In
ve

sti
ng

 in
 s

af
e

as
se

ts
:

a)
 T

he
 fu

nd
 in

ve
st

s
th

e
m

aj
or

ity
 o

f t
he

 p
or

tf
ol

io

in
 h

ig
h

qu
al

ity
 s

af
e

as
se

ts
.

b)
 R

et
ur

ns
 a

re
 g

en
er

at
ed

by

 h
ig

h
yi

el
d

se
cu

ri
tie

s,

w
hi

ch
 is

 li
m

ite
d

to
 4

0%

of
 to

ta
l a

ss
et

s.

Th
e

N
AV

 o
f t

he
 fu

nd
 is

 b
as

ed
 o

n
•

fo
rw

ar
d

pr
ic

in
g

an
d

th
e

va
lu

ati
on

of

 th
e

as
se

ts
 a

nd
 li

ab
ili

tie
s

ar
e

su
bj

ec
t t

o
lo

ca
l a

cc
ou

nti
ng

 r
ul

es
.

Th
e

N
AV

 is
 c

al
cu

la
te

d
on

 a
 w

ee
kl

y
•

ba
si

s
an

d
pu

bl
is

he
d

ea
ch

 F
ri

da
y.

N
o

Ta
bl

e
21

: S
um

m
ar

y
of

 M
EN

A
 C

ap
it

al
 P

ro
te

ct
ed

 F
un

ds
 S

ur
ve

y

174 Capital Protected Funds Survey

1 http://www.tadawul.com.sa

Survey of Islamic Protected FundsXI.

Funds screening - Methodology1.
While examining Islamic Capital Protected funds, we faced a serious lack of data, •
especially for those located in the MENA Region.
More often than not, proper fund databases are not available, and if they are, the “Capital •
Protection” category is not provided as a filter option. Therefore, we had to look for the
fund objective within the factsheet of each Islamic fund to check whether they propose
a “Capital Protection Feature” or not. Furthermore, most of the fund databases are not
comprehensive, as they do not mention all the Islamic protected funds existing in the
markets. They might not be updated as well; the fund could be already liquidated and
still listed as active. Besides, they do not provide the annual reports and prospectuses
and no proper fund rating/ranking is provided.
Generally, we collected Islamic Capital Protected Funds’ data from the internet. The list •
is not meant to be comprehensive. It only mentions the funds that we could find. The
exception was Saudi Arabia, where the Stock Exchange website “Tadawul” displays the
listed funds by showing the Shari’ah Compliance and Capital Protection features as well
as YTD rate of return, among others.1

For this particular survey, we considered two types of funds: (1) the funds that clearly •
claim themselves as “Capital Protected” and where the “Capital Protection” is a primary
objective and (2) the funds that state “Capital Protection” as one of the objectives in
addition to other targets that might be more prevalent. For instance, we considered
income funds or money market funds that claim to seek capital preservation. This is
particularly the case of some countries where we could not collect enough “pure” capital
protected funds and where we tried to complement it with the two other types.
In this pre-selection, we emphasized on documentation availability (prospectuses, •
factsheets and annual reports) of the chosen funds. This helped us to focus our attention
on funds with available information. For this particular category, we provided the YTD
rate of return and the type of assets.

Survey’s selection2.

Fund’s name Documents* YTD
Type of
assets

Total net
assets

(Currency of
denomination)

Total net
assets
($ M)

UAE Dubai Islamic Bank-Al Islami Savings Scheme N/A X X X X

UAE
Dubai Islamic Bank-Al Islami Capital Protected
CROCI Note

N/A X X X

UAE Dubai Islamic Bank-3 Year Capital Protected CLIP Note N/A X X X X

UAE Dubai Islamic Bank-3 Year Capital Protected DFM Note N/A X X X X

UAE
Dubai Islamic Bank-3 Year Capital Protected Global
Diversified Note

N/A X X X X

UAE
Dubai Islamic Bank-3 Year Capital Protected Global
REIT Note

N/A X X X X

UAE Dubai Islamic Bank-4 Year Capital Protected Water Note N/A X X X X

UAE
Dubai Islamic Fund-5 Year Capital Protected Notes
linked to DB-GSAM Hedge Fund

N/A X X X X

175Capital Protected Funds Survey

1 Data of January 2012.
2 Data of February 2012, source http://www.globalinv.net/PDFs/funds/Islamic%20Fund.pdf
3 Data of February 2012 except for “Faysal Islamic Savings Growth Fund” which Is that of December 2011
4 Data of March 2012, source:
http://www.atlasfunds.com.pk/downloads/fmr/fmr_mar-12.pdf
For the remaining Pakistani Islamic Protected Funds, Data related to Total Net Assets is that of February 2012, source
http://www.halaltamweel.com
5 Data of February 2012
6 For the Malaysian Islamic Protected Funds, Data related to Total Net Assets is that of March 2012, source http://
my.morningstar.com/
7 Data of February 2012

UAE
DIB-5 Year protection linked to the DWS Invest New
Resources Fund

N/A X X X X

UAE DIB-4-Year Note linked to DB Commodity Harvest Index N/A X X X X

UAE Dubai Islamic Bank- 3 Year 50/50 Upside Note N/A X X X X

Kuwait1 Global Islamic Fund Available -0.16% Fixed income 0.5 M KD2 1.8

Kuwait NBK-Islamic Ijarah fund XI Available 0.50% Ijarah assets N/A N/A

Kuwait NBK-Islamic Ijarah fund VIII Available 7.00% Ijarah assets N/A N/A

Kuwait NBK-Islamic Ijarah fund X Available 0.50% Ijarah assets N/A N/A

Kuwait NBK-Islamic Ijarah fund IX Available 5.96% Ijarah assets N/A N/A

Kuwait NBK-Thahabi Ijarah fund III Available 6.42% Ijarah assets N/A N/A

Kuwait NBK-Thahabi Ijarah fund V Available 0.58% Ijarah assets N/A N/A

Kuwait NBK-Thahabi Ijarah fund VI Available 0.54% Ijarah assets N/A N/A

Kuwait NBK-Thahabi Ijarah fund VII Available X Ijarah assets N/A N/A

Kuwait NBK-Islamic KD Ijarah Fund V Available 0.44% Ijarah assets N/A N/A

Kuwait NBK-Islamic KD Ijarah Fund I Available 0.54% Ijarah assets N/A N/A

Kuwait NBK-Islamic KD Ijarah Fund II Available 5.73% Ijarah assets N/A N/A

Kuwait NBK-Islamic KD Ijarah Fund III Available 5.50% Ijarah assets N/A N/A

Kuwait NBK-Islamic KD Ijarah Fund IV Available 0.50% Ijarah assets N/A N/A

Pakistan3 Atlas Islamic Income Fund Available 1.20% Mixed Assets 447 M PKR4 4.92

Pakistan Faysal Islamic Savings Growth Fund Available -2.70% X 568 M PKR 6.25

Pakistan HBL Islamic Money Market Fund Available X
i-Money
Market

435 M PKR 4.79

Pakistan Meezan Capital Protected Fund - II Available 3.93% Mixed assets 428 M PKR 4.71

Pakistan Meezan Islamic Income Fund Available 1.73% Mixed assets 956 M PKR 10.53

Malaysia5 CIMB-I Comm Structured Fund 2 Available 0.29%
Structured
Products 47 M USD6 47

Malaysia AMB Dana Aqeel-Capital Protected Fund Available 0.61%
Mixed assets-
Cautious

19.84 M
USD

19.84

Malaysia ASM Syariah Capital Protected Sector Linked Fund Available X
Mixed assets-
Cautious

N/A N/A

Malaysia AmAl-Amin Available X X 57.30 M USD 57.3

Malaysia AMB Dana Nabeel Available 0.39% X 52.07 M USD 52.07

KSA7 AlManarah Conservative Growth Fund Available 2.06% Mixed assets 136 M USD1 136

KSA HSBC Amanah Multi-Assets Defensive Portfolio Available 1.50%
Mixed assets-
Cautious

279 M SAR 74.40

KSA International Trade Finance Fund ( Sunbullah USD ) Available 1.50% Trade finance 121 M USD 121

KSA Alawwal Saudi Riyal Murabaha N/A 1.50% Trade finance 119 M SAR 31.73

KSA Al Yusr Morabaha & Sukuk Fund N/A 1.42%
i-Money
Market

55 M SAR 14.67

KSA International Trade Finance Fund ( Sunbullah SAR ) Available 1.34% Trade finance 9.91 M SAR 2.64

KSA International Trade Finance Fund (Sunbullah EURO) Available 1.21% Trade finance 17.31 M SAR 4.62

KSA Shuaa Murabaha Fund Available 1.06% Trade finance 61.95 M SAR 16.52

176 Capital Protected Funds Survey

KSA Al-Murabih SAR Murabaha Fund Available 1.01% Trade finance 85.87 M SAR 22.9

KSA AlWatheq Enhanced Murabaha N/A 0.96% Trade finance N/A N/A

KSA Al Yusr Aman Multi Asset Fund N/A 0.93% Mixed assets 15.42 M SAR 4.11

KSA Al Hadi Sharia Compliant Fund Available 0.90%
Mixed assets-
Cautious

91.64 M SAR 24.44

KSA Commodity Trading Fund SAR Available 0.68% Trade finance 2,002 M SAR 533.87

KSA Al Yusr SAR Morabaha Fund N/A 0.65% Trade finance 0.604 M SAR 0.16

KSA Al-Badr Murabaha Fund - US Dollars Available 0.57% Trade finance 24.19 M SAR 6.45

KSA Al-Badr Murabaha Fund - SAR Available 0.51% Trade finance 788.2 M SAR 210.19

KSA Commodity Trading Fund - USD Available 0.36% Trade finance 39.31 M USD 39.31

KSA AlAhli Sadaqqat Fund Available 0.26%
i-Money
Market

36.23 M SAR 9.66

KSA Alinma Saudi Riyal Liquidity Fund Available 0.25% Trade finance 131.3 M SAR 35.01

KSA ALDURRAH Liquidity Fund (Saudi Riyal) Available 0.21%
i-Money
Market

16.76 M SAR 4.47

KSA Investor Saudi Riyal Murabaha Available 0.18% Trade finance 58.19 M SAR 15.52

KSA The Investor Real Estate Fund For Multiple Projects Available 0.00% Real Estate 80.05 M SAR 21.35

KSA Al Rajhi GCC Shares Capital Protected Fund (90%) Available -0.99% Equity 24.52 M SAR 6.54

KSA Al Rajhi Local Shares Capital Protected Fund (90%) Available -3.73% Equity 22.85 M SAR 6.09

*:N/A means that the documentation is not available. Hence, it is impossible to get the rest of the information like
the YTD return: that is what “X” refers to.

Table 22: Pre-selection of Islamic Capital Protected Funds

Final selection3.
Islamic Capital Protected funds, whose documentations are available, will be short listed •
for the survey based on their performance (the YTD rate of return).
The number of funds to be studied depends on how many protected funds have been •
collected per country as well as on the funds’ performance.
UAE• : Though we were able to list 11 Islamic Capital Protected funds, we could not find
the respective prospectuses and annual reports. Therefore, we decided to exclude these
funds.
Kuwait• : Thirteen funds belong to the National Bank of Kuwait NBK Ijarah Fund Series.
While going through their respective factsheets, we noticed that they more or less
follow the same investment strategy. Thus, we picked only the best performing fund,
“NBK-Islamic Ijarah fund VIII”, which is the only fund that has outperformed inflation2,
as an example. We short listed “Global Islamic Fund”, despite its negative YTD rate of
return, in order to explore new management styles.
Pakistan• : In addition to its satisfactory performance, the “Meezan Capital Protected
Fund – II”, we were able to establish, is the only fund that is actually categorized as
“Capital protected”. The remaining funds belong to other categories (Income, or Money
Market funds) but also claim to seek capital preservation. We selected the second best
performing fund the “Meezan Islamic Income Fund” and the “HBL Islamic Money Market
Fund” to see how capital protection was implemented in a Money Market fund.
Malaysia• : We only included the funds that are categorized as Capital Protected, namely:
“ASM Syariah Capital Protected Sector Linked Fund”, “AMB Dana Aqeel-Capital Protected
Fund” and “CIMB-I Comm Structured Fund 2”. While the remaining funds are Money

1 Data of March 2012, source http://english.mubasher.info/portal/TDWL/searchMutualFunds.html
2 Inflation rates were obtained from the World Development Indicators & Global Development Finance database,
www.worldbank.org.

177Capital Protected Funds Survey

Market funds with capital preservation features.
KSA• : We short-listed the 6 best performing capital protected funds whose
documentations are available.

Fund’s name YTD Type of assets Total net assets

Kuwait Global Islamic Fund -0.16% Fixed income 0.5 M KD

Kuwait NBK-Islamic Ijarah fund VIII 7.00% Ijarah assets N/A

Pakistan Meezan Capital Protected Fund - II 3.93% Mixed assets 428 M PKR

Pakistan Meezan Islamic Income Fund 1.73% Mixed assets 956 M PKR

Pakistan HBL Islamic Money Market Fund N/A i-Money Market 435 M PKR

Malaysia CIMB-I Comm Structured Fund 2 0.29% Structured Products 47 M USD

Malaysia AMB Dana Aqeel-Capital Protected Fund 0.61% Mixed assets-Cautious 19.84 M USD

Malaysia ASM Syariah Capital Protected Sector Linked Fund N/A Mixed assets-Cautious N/A

KSA AlManarah Conservative Growth Fund 2.06% Mixed assets 136 M USD

KSA HSBC Amanah Multi-Assets Defensive Portfolio 1.05% Mixed assets-Cautious 279 M SAR

KSA International Trade Finance Fund ( Sunbullah USD ) 1.05% Trade finance 121 M USD

KSA Shuaa Murabaha Fund  1.06% Trade finance 61.95 M SAR

KSA Al-Murabih SAR Murabaha Fund 1.01% Trade finance 85.87 M SAR

KSA Al Hadi Sharia Compliant Fund 0.09% Mixed assets-Cautious 91.64 M SAR

Table 23: Final selection of Islamic Capital Protected Funds

Kuwait Pakistan Malaysia KSA

NAV Average 1.80 6.68 33.42 65.88

NAV Median 1.80 4.79 33.2 49.42

Number of Funds 2 3 3 6

0.00

10.00

20.00

30.00

40.00

50.00

60.00

70.00

U
SD

 M
ill

io
n

NAV Average NAV Median

Figure 14: Islamic final selected capital protected funds aggregation

Survey results4.

The approacha.

For each fund, we tried to collect the respective prospectus and the latest annual report, •
if available.
In the prospectus, we looked for information related to: type of fund, type of assets, •
protection strategy and fund valuation.

178 Capital Protected Funds Survey

1 For the conventional protected funds we usually refer to the following type of assets: Equity, Bond and Mixed
assets.
2 www.zawya.com , www.gulfbase.com and http://www.trustnetmiddleeast.com/Investments/Perf.aspx?univ=GS

We might encounter different type of assets for the Islamic protected fund. This is •
mainly due to the “Islamic contract-based” nature of the funds. Therefore, in addition
to traditional classifications1, we will also find Ijarah based assets, trade finance or
Murabahah, etc.
For the funds where the type of assets was not mentioned, we scrutinized the respective •
prospectus and some websites2, to confirm their asset allocation.
Normally, the redemption/subscription frequency is deduced from the annual report. •
Sometimes, either the annual report consolidates the results of the respective mother
companies and hence do not disclose the details of the funds; or the annual report is
simply not available online by any means.
Pertaining to secondary trading, we browse the respective stock exchange markets and •
we check whether the ISIN code of the fund or its name appear on the website.

179Capital Protected Funds Survey

Funds’ profilesb.

NBK Islamic Ijarah fund VIII
NBK Islamic Ijarah Fund and NBK Thahabi Ijarah fund •
series operate under the same principle. Therefore,
we take NBK-Islamic Ijarah fund VIII as an example,
the investment and protection strategies are to be
generalized for the others.NBK Islamic KD Ijarah Fund,
however, is denominated in KWD while the above
mentioned series uses USD. This implies an additional
currency SWAP in the investment strategy as will be
explained later.

Investment strategy

NBK Islamic Ijarah fund VIII has a ‘fund of funds’ •
structure. All the assets are invested in Ijarah
transactions through “Wafra Equipment Ijara Fund”.
NBK Islamic Ijarah fund VIII expects to repay the
Principal at the end of the Fund Term and to provide
fixed monthly yield called “the lease yield”.
NBK Islamic Ijarah fund and NBK Thahabi Ijarah fund •
series functioning includes several counterparties and
could be summarized as follows:

Financial institution:	  The fund
is managed by Wafra Capital
Partners, a Cayman Island limited
partnership L.P and distributed by
National Bank of Kuwait S.A.K.
Inception date:	  29th November
2007.
Investment Objective:	  The Fund
aims to provide Investors with
reliable and attractive monthly
returns by investing in Ijarah
transaction and expects to repay
the Principal at the end of the Fund
Term, and to provide “varying”
yield.
Type of assets:	  Ijarah assets.

Lease
Originator

Wafra

Lessees

Leaseco

Wafra Equipment Ijarah
Fund

Units

Invests

NBK Islamic Ijarah Fund
VIII

Investors

Fund Manager

Purchase (from) and lease
back the equipments to Leaseco

Sublease the equipments to
end users

Figure 15: NBK Islamic Ijarah Fund investment Strategy

Wafra Equipement Ijarah Fund: The investment fund that is a limited liability company organized and
established as an exempted company under the laws and regulations of the Cayman Islands and approved
by the relevant regulatory authorities, in which NBK shall invest for and on behalf of the Fund pursuant.
Lease Originator: Companies selected by
Wafra that are specialized in generating
and servicing lease transactions.
Leaseco: A special purpose subsidiary of
the Lease Originator(s) established for
the benefit of the Fund (Also referred to
as an SPV).The Fund expects to purchase
equipment from the Leasecos and then
immediately lease the equipment back to
Leasecos under the terms of the Master
Leases. Each Master Lease will require
Leaseco to pay rents to the Wafra Fund,
adequate to pay (a) the Lease Yield; (b)
return of Investor Principal; (c) Fund costs;
and (d) fees. The title of the assets will pass
at the end of the term to Leaseco.
Lessees: Leaseco will sublease the
equipment to users, pursuant to subleases
identified at the time the Wafra Fund
acquires the equipment. The responsibility
for servicing the subleases, and for re-
leasing or re-marketing the equipment, will
be assumed by Leaseco. These leases will
be assigned to the Wafra Fund as security
for the Master Leases.

180 Capital Protected Funds Survey

1 http://www.qfinance.com/contentFiles/QF01/g4fqn4jz/10/0/risk-management-of-islamic-finance-instruments.pdf
2 Sources:
Website: http://www.kuwait.nbk.com/investmentandbrokerage/investmentfunds/ijarafunds/islamicijarafundviii/
default_en_gb.aspx
Fund’s facts: http://www.kuwait.nbk.com/investmentandbrokerage/investmentfunds/ijarafunds/islamicijarafundviii/
default_en_gb.aspx
Fact Sheet: http://www.kuwait.nbk.com/investmentandbrokerage/investmentfunds/ijarafunds/
islamicijarafundviii/$Document/Downloads/en-gb/MainCopy/$UserFiles/IIFVIIIENG%20(1).pdf
Prospectus: http://kuwait.nbk.com/investmentandbrokerage/investmentfunds/ijarafunds/
islamickdijarafundiii/$Document/Downloads/en-gb/MainCopy/$UserFiles/KDIjaraProsIIIEng.pdf

Similarly, NBK Islamic KD Ijarah Fund series has a ‘fund of funds’ structure. All the assets •
are invested in Ijarah transactions through the “Wafra Ijara KWD Fund”. NBK Islamic KD
Ijarah Fund series are also expected to repay the Principal at the end of the Fund Term
and to provide fixed monthly yield called “the lease yield”.
NBK Islamic KD Ijarah Fund series follows the same investment strategy as its NBK •
Ijarah fund peers. The difference is that this particular fund series is denominated in
Kuwaiti Dinar which implies an additional step within the overall fund functioning.

A majority of Leaseco’s income is expected to be derived from the subleases. Additional •
income will be derived from re-leasing, or (if Leaseco exercises its purchase option)
selling the equipment at the end of the initial leases, or a combination thereof (“Residual
Value”). The historical Residual Values realized by the Lease Originator are expected to
substantially exceed the Residual Values required to fund the master lease payments
remaining after the sublease rentals are taken into account. If Leaseco receives income in
excess of current Master Lease payments, such income may be retained and reinvested in
additional equipment, which will also secure the obligations of the Leaseco to the Fund.2

Investors

Wafra
Fund Manger

Lessees

Leaseco

Lease
Originator

NBK Islamic KD Ijarah
Fund

Wafra Ijara KWD
Fund

Purchase and lease back the
Swap Counterparty

Swap USD proceeds with KWD

equipments to Leaseco in USD

Islamic Currency Swap: • The Master Leases
are expected to be in US Dollars, while the
Principal and Lease Yield will be denominated
in KD. The Wafra Fund will engage in
Islamic Swap transactions to facilitate the
distributions of Lease Yield and the return
of Principal to Investors in KD. These kinds
of swaps (called also Islamic Cross-Currency
Swaps) debuted only recently when Standard
Chartered executed the first ever swap
transaction of this kind for Bank Muamalat
Malaysia in July 2006.1

Figure 16: NBK Islamic KD Ijarah Fund investment Strategy

181Capital Protected Funds Survey

Protection strategy:
The Fund, through its investment in the “Wafra Equipment Ijara Fund”, will rely primarily •
on equipment leases and the Residual Value of the equipment to repay the Investor
Principal and to pay the yield to the investors.
NBK Islamic Ijarah fund VIII assets are of high credit quality. In fact, the underlying fund, •
“Wafra Equipment Ijara Fund”, will select high quality lessees, with a particular focus on
“Fortune 1000” companies and companies that are found to be of high credit quality.
The equipment portfolios of the Fund will have a diverse range of leases and equipment
types, thus, reducing the overall Fund risk.

182 Capital Protected Funds Survey

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183Capital Protected Funds Survey

1 Sources:
Website: http://www.globalinv.net/contentdisp.asp?pageId=532
Fund’s Profile: http://www.gulfbase.com/mutualfund/funddetail/global-islamic-fund/global-investment-house-
global/state-of-kuwait/242
Factsheet: http://www.globalinv.net/PDFs/funds/Islamic%20Fund.pdf
Prospectus: http://www.globalinv.net/PDFs/funds/Islamic%20fund_ArticleOfA.pdf

Global Islamic Fund

Investment strategy

To compete with short to medium term •
fixed rate instruments (Denominated in KD);
the fund invests in all Shari’ah-compliant
instruments locally and internationally
with special emphasis on Murabahah and
Wakalah transactions.
The Fund manager will diversify the •
investments to provide clients with
higher liquidity and lower volatility. The
Fund generally invests in the following
instruments, according to the Shari`ah:

Sukuk issued by Government and •
semi-government institutions
denominated in KWD or any other
currency.

Shari’ah compliant instruments •
issued by Kuwaiti banks, regional
banks and international banks.

Local and international Money Market Instruments.•

Diversified Islamic investment tools.•

Protection strategy:
The protection is ensured by adopting a cautious investment policy.•
The fund invests in fixed income high credit quality assets. (mainly Murabahah and •
Wakalah).
The fund manager obtains necessary guarantees from the institutions in which he •
invests, provided that they are highly solvent in the first place.
The fund diversifies investment risks by allocating its assets as follows:•

The fund can invest up to 100% of the assets in governmental and semi-o
governmental securities.

Its investments in Kuwaiti banks should not exceed 30% of the total assets.o 1

Financial institution:	  The fund is
managed by Global Investment
House.
Inception date:	  December 2002.
Investment Objective:	  The Fund
seeks to generate consistent
returns higher than KD fixed deposit
rates between 3-12 months, while
preserving capital and complying
with Shari`a guidelines.
Type of assets:	  Fixed Income.

184 Capital Protected Funds Survey

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185Capital Protected Funds Survey

1 Sources:
Website: http://www.almeezangroup.com/MutualFunds/OpenEndFunds/MeezanCapitalProtectedFundII/tabid/146/
Default.aspx
Factsheet: http://www.almeezangroup.com/Portals/0/FMR_Jan12.pdf
Prospectus: http://www.almeezangroup.com/Portals/0/MCPFII_OD.pdf

Meezan Capital Protected Fund - II

Investment and Protection Strategy

Capital Protection Segment
Approximately 75.5% of the Fund would be •
allocated to Capital Protection Segment,
which will grow to the level of initial
investment at maturity.
Capital protection shall be achieved through •
investing funds in “AAA”-rated Shari’ah
Compliant Ijarah Sukuk issued by the
Government of Pakistan.
Alternatively, the assets of the Fund may •
be placed with a Scheduled Islamic Bank or
Islamic windows having at least a minimum
rating of A- (A minus) at the time of
placement.
The remaining assets of the Fund will be •
allocated to the Investment Segment and
may be invested in assets with minimum
investment grade, wherever applicable, that
have the potential to provide a high return to investors.

Investment Segment:
24.5% of the Fund would be allocated to the Investment Segment that is expected to •
provide the upside over and above principal at the time of maturity.
 This amount will be invested in Shari’ah compliant equity securities listed on Pakistani •
Stock Exchanges.1

Financial institution:	  The fund is
managed by Al Meezan Investment
Management Limited a subsidiary
of Meezan Bank.
Inception date:	  5th July 2011.
Investment Objective:	  The
objective is to provide investors
100% protection of their capital
while offering them competitive
returns through participation in
the equity market. The duration of
the fund is 3 years and six weeks
from the date of subscription of
units.
Type of assets:	  Mixed assets.

186 Capital Protected Funds Survey

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s2

187Capital Protected Funds Survey

1 “Halal”is an Arabic word that means “lawful”.
2 Sources:
Website:http://www.almeezangroup.com/MutualFunds/OpenEndFunds/MeezanIslamicIncomeFund/tabid/76/
Default.aspx
Prospectus: http://www.almeezangroup.com/Portals/0/Offering_Doc_MIIF.pdf
3 January 2012 http://www.almeezangroup.com/Portals/0/FMR_Jan12.pdf

Meezan Islamic Income Fund

Investment strategy

The fund might not be categorized as •
“capital protected”-it is rather considered
as an income oriented fund- yet capital
preservation is one of the stated objectives.
The purpose of the fund is to provide safe •
and stable halal1 income and to generate
long-term risk adjusted returns.
The Fund shall also keep an exposure on •
short-term instruments for the purpose of
maintaining liquidity and to capitalize on
exceptional returns at any point of time.
The portfolio shall be geared towards •
maximizing annual income to the extent
consistent with preservation of capital.
The portfolio is composed of long, medium
and short term high quality Islamic income
instruments.2

Protection strategy:
The capital protection strategy relies on the type of assets that constitute the portfolio:•

Credit quality of the portfolio: (in % NAV)o 3

43% government securities, 14% AAA, 10% AA-.
Sector allocation: (in %NAV)o

39% Ijarah Sukuk, 43% Government backed / guaranteed Securities, 13%
Commercial Papers.

Financial institution:	  The fund is
managed by Al Meezan Investment
Management Limited a subsidiary
of Meezan Bank.
Inception date: 	 15th January 2007.
Investment Objective:	  To provide
investors with a high and stable
rate of current income consistent
with long term preservation of
capital in a Shari’ah compliant
way. A secondary objective is to
take advantage of opportunities to
realize capital appreciation.
Type of assets:	  Mixed assets.

188 Capital Protected Funds Survey

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189Capital Protected Funds Survey

1 Sources:
Prospectus: http://www.hblasset.com/assets/pdf/HBL%20Islamic%20Money%20Market%20Fund.pdf
Fund’s facts: http://www.hblasset.com/HBL_Islamic_Funds_Term_Sheet.pdf
Factsheet:
http://www.hblasset.com/FundReportUpload/fmr_nov_2011.pdf

HBL Islamic Money Market Fund

Investment strategy

To align itself with the stated objectives, •
the fund would invest in low risk Shari’ah
compliant securities:

Mainly Bank deposits with Islamic o
banks and Islamic banking windows
of conventional banks;

Shari’ah compliant money market o
instruments such as Certificate
of Islamic Investments (COII),
Certificate of Musharakah (COM)
with Commercial banks & DFIs, Non-
banking Financial Companies (NBFCs)
and Mudarabah companies;

Any other Shari’ah compliant money o
market structure, instrument or
security such as Certificate of Deposit
(CoD), Musharakah, Mudarabah,
Ijarah, Murabahah (including
commodity Murabahah), Salam, Istisna’, etc. as per the guidelines of the Fund’s
Shari’ah Advisor; and

The Fund can also invest in Shari’ah Compliant investments outside Pakistan o
local regulation.

The maximum time to maturity of any asset invested in this fund shall not exceed six (6) •
months.

Protection strategy:
Fund asset selection is subject to certain rating criteria:•

Rating of any security in the portfolio shall not be lower than Double A (AA).o

Rating of any Bank/DFI with which funds shall be placed shall not be lower than o
Double A (AA).

Rating of any NBFC or Mudarabah where funds shall be placed shall not be lower o
than Triple A (AAA) 1

Financial institution:	  The
fund manager is HBL Asset
Management.
Inception date:	  10th May 2011.
Investment Objective:	  The
objective of the Fund is to seek high
liquidity, competitive return and
maximum possible preservation of
capital for investors.
Type of assets:	  Islamic money
market.

190 Capital Protected Funds Survey

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191Capital Protected Funds Survey

1 Sources:
Prospectus: http://www.ambmutual.com.my/downloads/Prospectus%20of%20AMB%20Dana%20Aqeel.pdf
Fund’s fact: http://www.ambmutual.com.my/ambdacp.htm
Factsheet:
http://www.ambmutual.com.my/publications/fact_sheet/2012/Jan/AMBDAQ.pdf

AMB Dana Aqeel-Capital Protected Fund

Investment strategy

The Fund is suitable for investors with the •
following profile:

Seeking low risk investments that o
are in accordance with Shari’ah
Principles.

Seeking a Fund that protects the o
initial capital with potential to yield a
better return than the 12-month GIA
rates of commercial banks.

Medium term investment horizon of o
3 years.

Protection strategy:
The Fund will primarily invest in high quality •
locally issued Sukuk to provide capital
protection until maturity. 85% to 98% of the
fund’s NAV will be injected in Shari’ah fixed
income securities.
Investment in fixed income securities is an attempt to make its value appreciate to a level •
that is equivalent to the capital provided by the Unit Holders to this Fund, or greater, at
the end of the investment period, through the generation of income. This will allow the
investment in fixed income securities to protect the capital of the Unit Holders at the
end of the period and where possible, provide some capital returns.
The remainder of the initial capital is invested in Shari’ah-compliant equities to provide •
potential capital gain to the Fund. The Equity threshold is set at 10% NAV.
At least 2% NAV should be held in cash equivalent instruments for liquidity purposes. •
Interest rate risk is mitigated by way of investing in fixed income securities maturing on •
or before the maturity of the Fund.
Credit or issuer’s risk is mitigated through investing in a portfolio of diversified fixed •
income securities with a minimum credit rating of “AA3” or its equivalent, undertaking
thorough analysis prior to the purchase of the fixed income securities, limiting the amount
of investment in particular fixed income securities issued by a particular group (spread
and concentration), monitoring constantly all the invested fixed income securities to
detect any possibility of default at an early stage.1

Financial institution:	  The fund is
managed by CIMB-Principal Asset
Management Berhad and the
trustee is Amanah Raya Trustees
Berhad.
Inception date:	  9th March 2010.
Investment Objective:	  To protect
the initial capital of the Fund
at the Maturity Date through
investments principally in fixed
income securities, predominantly
in Sukuk that are permissible under
Shari’ah Principles whilst seeking
potential returns throughout the
tenure of the Fund.
Type of assets:	  Mixed Assets.
Cautious.

192 Capital Protected Funds Survey

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AV

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AV

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on

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N
o1

193Capital Protected Funds Survey

1 Sources:
Website:
http://www.asminvestment.com.my/products/fund_information
Fund’s profile:
http://financemalaysia.blogspot.com/2011/12/new-fund-asm-syariah-capital-protected.html

ASM Syariah Capital Protected Sector
Linked Fund

Investment strategy

The fund targets investors who are willing to:•
Invest for 3 years tenure.o

Protect their initial capital upon the o
maturity of the fund.

Receive potentially higher returns than o
the rate of return of the 12-month
Kuala Lumpur Islamic Reference
Rates (KLIRR), which is the Fund’s
performance benchmark.

Protection strategy:
To achieve the capital protection objective, the •
Fund will invest 88% to 92% of the Fund’s Net
Asset Value (NAV) in 3-year Islamic Negotiable
Instruments of Deposits (INIDs) issued at
a discount by several premier financial
institutions in Malaysia. This will potentially
protect investors’ capital, including a sales charge payable by investors.
To realize the potential return objective, the fund will invest 6% to 12% of the Fund’s NAV •
in quality Shari’ah-compliant equities of various sectors in Bursa Malaysia. These equities
have been identified as the leaders of their respective sectors under the Economic
Transformation Programme (ETP). The Fund’s name thereby reflects the composition of
the Fund’s portfolio consisting of INIDs and each sector’s leading equities.
Up to 2% of the NAV is invested in liquid assets.• 1

Financial institution:	  The fund
is managed by ASM Investment
Service Berhad.
Inception date:	  29th November
2011.
Investment Objective:	  To provide
a rate of return higher than
that of the Fund’s Performance
Benchmark whilst seeking to
provide capital protection on
investors capital over the tenure
of the fund.
Type of assets:	  Mixed Assets-
Cautious.

194 Capital Protected Funds Survey

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sk

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o1

195Capital Protected Funds Survey

1 “Wa’ad“ is an Arabic word and it means “promise”.
2 Sources:
Fund’s Fact:
http://www.trustnetoffshore.com/Factsheets/Factsheet.aspx?fundCode=BOFG4&univ=DC
http://my.morningstar.com/ap/quicktake/overview.aspx?PerformanceId=0P0000HK0U&activetab=Overview

CIMB-I Commodities Structured Fund 2

Investment strategy

To provide a regular income, the Fund •
invests in a 5-year Islamic Dynamic Best
of Commodity Structured Product that
invests in Shari’ah-compliant money market
instruments and instruments employing the
Wa’ad principle1.
The capital protection element of the Fund •
lies on the assumption that the units will be
held until the maturity date.

Protection strategy:
The Fund invests at least 95% of the NAV in •
100% Capital Protected Five (5)-year Islamic
Dynamic Best of Commodity Structured
Product (“Dynamic Commodity Structure”)
issued by CIMB.
The capital protection is provided by payouts •
on the Shari’ah-compliant structured product
and not by any guarantee; therefore a full
return of the capital is not guaranteed for early redemption.
Additionally, through the Dynamic Commodity Structure, the Fund will receive potential •
annual dividend payments linked to the best performance of the three Dynamic Indices.
Hence, Unit holders will not risk choosing the wrong Dynamic Index from the three
possible choices; but instead will be rewarded with the performance of the best Dynamic
Index.
Up to 5% of the NAV will be invested in Shari’ah compliant liquid assets for liquidity •
purposes.

Dynamic Commodity Structure:o

The Dynamic Commodity Structure is structured by the issuer (CIMB) from a combination •
of Shari’ah-compliant money market instruments and instruments employing the Wa’ad
principle.

Dynamic Indiceso

The best performing Dynamic Index is the Dynamic Index with the highest index level as •
determined on the final calculation date (i.e. the final date on which the closing price of
each underlying instrument is to be determined).
A Dynamic Index is made up of a Reference Portfolio and a Defensive Asset e.g. Shari’ah-•
compliant fixed income instrument. The Dynamic Index works by rebalancing between
the Reference Portfolio and the Defensive Asset depending on how the market is
performing.2

There are three Reference Portfolios, each representing a weighted basket of Reference •
Isovol Indices: CIMB Dynamic Isovol Agricultural Index, CIMB Dynamic Isovol Energy
Index and CIMB Dynamic Isovol Metal Index.

Financial institution:	  The fund is
managed by CIMB Principal Asset
Management.
Inception date:	  21st April 2008.
Investment Objective:	  The Fund
aims to provide investors with
regular income over the tenure
of the Fund (5 years) linked to
the performance of commodities
through investments that conform
to the Shari’ah.
Type of assets:	  Structured
Products.

196 Capital Protected Funds Survey

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on

/
Re

de
m

pti
on

 F

re
qu

en
cy

Pr
ot

ec
ti

on
 te

ch
ni

qu
e

Va
lu

ati
on

 M
et

ho
d

Se
co

nd
ar

y
 tr

ad
in

g

CI
M

B-
I

Co
m

m
od

iti
es

St

ru
ct

ur
ed

 F
un

d
2

St
ru

ct
ur

ed
 P

ro
du

ct
s:

D
yn

am
ic

 c
om

m
od

it
y

st
ru

ct
ur

e:
 It

 is
 a

co

m
bi

na
tio

n
of

 m
on

ey

m
ar

ke
t i

ns
tr

um
en

ts
 a

nd

W
a’

ad
 b

as
ed

 s
tr

uc
tu

re
d

pr
od

uc
ts

.

Cl
os

e-
en

de
d

N
um

be
r

of
 u

ni
ts

 a
s

at
 3

0th
 Ju

ne
 2

01
1:

1

Cr
ea

te
d:

 0
Ca

nc
el

le
d:

86

,3
96

,6
27

In
ve

sti
ng

 in
 1

00
%

 c
ap

it
al

 p
ro

te
ct

ed

St
ru

ct
ur

ed
 P

ro
du

ct
s:

At
 le

as
t 9

5%
 is

 in
ve

st
ed

 in
 “

D
yn

am
ic

co

m
m

od
ity

 s
tr

uc
tu

re
”

is
su

ed
 b

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CI

M
B,

 w
hi

ch

no
t o

nl
y

en
su

re
s

ca
pi

ta
l p

ro
te

cti
on

 b
ut

 a
ls

o
re

w
ar

ds
 th

e
in

ve
st

or
s

w
ith

 th
e

pe
rf

or
m

an
ce

 o
f

th
e

be
st

 3
 D

yn
am

ic
 In

di
ce

s.

Th
e

N
AV

 o
f t

he
 fu

nd

is
 c

al
cu

la
te

d
us

in
g

fo
rw

ar
d

pr
ic

in
g

m
et

ho
d.

N
o2

197Capital Protected Funds Survey

1 Sources:
Prospectus: http://www.ncbc.com/en/TermsEn/MCGF.pdf
Factsheet: http://www.ncbc.com/uploads/funds/AMCGF_Jan2012En.pdf
Fund’s profile: http://www.trustnetoffshore.com/Factsheets/Factsheet.aspx?univ=DC&fundCode=BZFG2&pagetype
=performance

Almanarah Conservative Growth Fund

Investment strategy

“Almanarah conservative Growth Fund” is
an open-ended ‘fund of funds’ with a low to
medium risk profile.

Protection strategy:
The capital protection strategy relies on the •
type of assets that constitute the portfolio:

Low to medium risk investments:o

The fund invests 25% of its portfolio
in other Shari’ah Compliant equity
funds.
Low risk investments.o

The remaining 75% of the Fund
portfolio is invested in low risk
Murabahah and Sukuk Funds.1

Financial institution:	  The fund
is managed by The National
Commercial Bank (NCB) Capital
Company.
Inception date:	  October 2003.
Investment Objective:	  To provide
a high level of capital preservation
and limited growth opportunities
through investing in Equities.
Type of assets:	  Mixed assets.

198 Capital Protected Funds Survey

1  L
is

te
d

in
 S

au
di

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to

ck
 E

xc
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ad

aw
ul

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p:
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da
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ul
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a

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ofi

le
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um
m

ar
y

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Fu
nd

 n
am

e
Ty

pe
 o

f a
ss

et
Ty

pe
 o

f
fu

nd

Su
bs

cr
ip

ti
on

/
Re

de
m

pti
on

 F

re
qu

en
cy

Pr
ot

ec
ti

on
 te

ch
ni

qu
e

Va
lu

ati
on

 M
et

ho
d

Se
co

nd
ar

y
 tr

ad
in

g

A
lm

an
ar

ah

Co
ns

er
va

ti
ve

G

ro
w

th
 F

un
d

M
ix

ed
 a

ss
et

s:
Sa

fe
 a

ss
et

s:
 In

ve
st

m
en

ts

in
 M

ur
ab

ah
ah

 &
 S

uk
uk

Fu

nd
s,

 c
as

h
an

d
ca

sh

eq
ui

va
le

nt
.

Ri
sk

y
as

se
ts

:
in

ve
st

m
en

ts
 in

 S
ha

ri
’a

h
Co

m
pl

ia
nt

 e
qu

ity
 fu

nd
s.

O
pe

n-
en

de
d

N
/A

In
ve

sti
ng

 in
 s

af
e

as
se

ts
:

A
bo

ut
 7

5%
 o

f f
un

d’
s

po
rtf

ol
io

 is

in
ve

st
ed

 in
 s

af
e

M
ur

ab
ah

ah
 a

nd

Su
ku

k
Fu

nd
s.

Th
e

N
AV

 w
ill

 b
e

co
nc

lu
si

ve
ly

•

de
te

rm
in

ed
 o

n
ev

er
y

D
ea

lin
g

D
ay

(M

on
da

y
&

 W
ed

ne
sd

ay
) b

as
ed

 o
n

th
e

la
te

st
 a

va
ila

bl
e

se
cu

ri
ty

 p
ri

ce
s

on
 th

at
 D

ea
lin

g
D

ay
.

Ye
s1

199Capital Protected Funds Survey

1 Sources:
Prospectus: http://www.hsbcamanah.com/amanah/attachments/amg/defensice_prosp.pdf
Factsheet: http://www.hsbcamanah.com/amanah/attachments/amg/defensic_factsh.pdf
Fund’s Profile:
http://www.trustnetmiddleeast.com/Factsheets/Factsheet.aspx?fundCode=B4FK5&univ=GS

HSBC Amanah Multi-Assets Defensive Fund

Investment strategy

“• Amanah Defensive Fund” is a medium to
low risk ‘fund of funds’.
The fund invests in a range of Shari’ah •
compliant investment funds such as trade
finance, local equity and international equity
in order to achieve its objective.
The Fund is an income accumulation Fund •
whereby its income will be reinvested and
not distributed to the Unit Holders. The
reinvestment of the Fund’s income will be
reflected in the value and price of the Units.

Protection strategy: A variation of CPPI
The Fund will follow an active investment •
strategy by allocating capital, at different
weightings, across Shari’ah compliant
securities such as Murabahah transactions,
Sukuk and equities either directly, through
Mutual Funds or through Discretionary
Managed Accounts in order to achieve the portfolio objective.
The Fund is a low to medium risk portfolio that invests a high percentage of capital in •
Murabahah Trade transactions and/or Islamic bonds (Sukuk) and a smaller percentage
in Shari’ah-compliant equity Funds.
The equity exposure of the Fund will not exceed 30% of the total assets in the Fund. •
The Fund Manager may invest a maximum of 10% of the Funds assets directly in other
investments.1

Financial institution:	  The fund is
managed by HSBC Saudi Arabia
Limited.
Inception date:	  28th December
2004.
Investment Objective:	  To seek
medium to long-term capital
growth with the emphasis on
capital preservation and limited
exposure to equity markets.
Type of assets:	  Mixed assets-
Cautious.

200 Capital Protected Funds Survey

1  L
is

te
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ar
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Fu
nd

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am

e
Ty

pe
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f a
ss

et
Ty

pe
 o

f
fu

nd

Su
bs

cr
ip

ti
on

/
Re

de
m

pti
on

 F

re
qu

en
cy

Pr
ot

ec
ti

on
 te

ch
ni

qu
e

Va
lu

ati
on

 M
et

ho
d

Se
co

nd
ar

y
 tr

ad
in

g

H
SB

C
A

m
an

ah

M
ul

ti
-A

ss
et

s
D

ef
en

si
ve

 F
un

d

M
ix

ed
 a

ss
et

s-
Ca

uti
ou

s:
Sa

fe
 a

ss
et

s:
 M

ur
ab

ah
ah

&

 S
uk

uk
 fu

nd
s

or

th
ro

ug
h

di
re

ct

in
ve

st
m

en
ts

/
ca

sh
.

Ri
sk

y
as

se
ts

: L
oc

al
 &

in

te
rn

ati
on

al
 e

qu
ity

fu

nd
s

or
 th

ro
ug

h
di

re
ct

in

ve
st

m
en

t.

O
pe

n-
en

de
d

N
/A

A
 v

ar
ia

ti
on

 o
f C

PP
I:

1-
 A

 h
ig

h
pe

rc
en

ta
ge

 o
f

th
e

ca
pi

ta
l i

s
in

ve
st

ed

in
 M

ur
ab

ah
ah

 T
ra

de

tr
an

sa
cti

on
s

an
d/

or
 Is

la
m

ic

bo
nd

s
(S

uk
uk

) a
nd

 a
 s

m
al

le
r

pe
rc

en
ta

ge
 in

 S
ha

ri
’a

h-
co

m
pl

ia
nt

 e
qu

ity
 F

un
ds

.
2-

 T
he

 w
ei

gh
tin

g
of

 e
ac

h
as

se
t

ty
pe

 c
ou

ld
 b

e
ad

ju
st

ed
 in

or

de
r

to
 a

ch
ie

ve
 th

e
fu

nd
’s

ob

je
cti

ve
s.

Th
e

N
AV

 o
f t

he
 fu

nd
 is

 c
al

cu
la

te
d

•
M

on
da

y
an

d
W

ed
ne

sd
ay

 b
as

ed

on
 fo

rw
ar

d
pr

ic
in

g.
Ye

s1

201Capital Protected Funds Survey

1 Terms and Conditions, The Factsheet and The annual report can be found on Samba Capital Website
 http://sambacapital.samba.com/English/Consumer/HTML/consMutualFunds_01_01_en.html

International Trade Finance Fund
(Sunbullah USD)

Investment strategy

The fund seeks to provide liquidity and capital
appreciation through short and medium term
investments in non-interest bearing:

International trade finance o
transactions.

Islamic money market instruments, o
units of other Islamic money market
funds.

Sukuk; however, the Fund shall not o
invest more than 20% of its assets
in long-term instruments, such as
Sukuk.

Protection strategy:
The bulk of the capital is invested in •
International Trade Finance/Murabahah
transactions through purchasing of goods
and commodities on a spot basis & selling to third parties at a mark up on a deferred
payment basis.
Even the remaining small portion is invested in safe fixed income instruments (Islamic •
Money Market instruments and Sukuk).1

Financial institution:	  The fund is
managed by Samba Capital.
Inception date:	  5th December
1986.
Investment Objective:	  Capital
appreciation through non-interest
bearing international trade finance
transactions.
Type of assets:	  Trade Finance /
Murabahah.

202 Capital Protected Funds Survey

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or

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Ty

pe
 o

f
fu

nd

Su
bs

cr
ip

ti
on

/
Re

de
m

pti
on

 F

re
qu

en
cy

Pr
ot

ec
ti

on
 te

ch
ni

qu
e

Va
lu

ati
on

 M
et

ho
d

Se
co

nd
ar

y
 tr

ad
in

g

In
te

rn
ati

on
al

Tr

ad
e

Fi
na

nc
e

Fu
nd

 (S
un

bu
lla

h
U

SD
)

Tr
ad

e
Fi

na
nc

e
M

ur
ab

ah
ah

:
Sa

fe
 a

ss
et

s:
 In

te
rn

ati
on

al

Tr
ad

e
Fi

na
nc

e
Tr

an
sa

cti
on

s,

M
on

ey
 M

ar
ke

t i
ns

tr
um

en
ts

,
Su

ku
k

(le
ss

 th
an

 2
0%

),
an

d
ca

sh
.

O
pe

n-
en

de
d

N
um

be
r

of
 u

ni
ts

 a
s

at
 3

1st

D
ec

em
be

r
20

10
:1

Cr
ea

te
d:

 1
,4

32
,2

81
.7

9
Ca

nc
el

le
d:

 1
,2

84
,4

27
.3

7

In
ve

sti
ng

 in
 M

ur
ab

ah
ah

tr

an
sa

cti
on

s:
N

ea
rl

y
96

%
 w

as
 in

ve
st

ed

in
 C

om
m

od
ity

 a
nd

 E
ne

rg
y

M
ur

ab
ah

ah
.2

Th
e

N
AV

 w
ill

 b
e

•
ca

lc
ul

at
ed

 o
n

a
da

ily

ba
si

s
us

in
g

Fo
rw

ar
d

Pr
ic

in
g.

Ye
s3

203Capital Protected Funds Survey

1 Sources:
Factsheet:
http://www.shuaacapital.com.sa/Files/SMFFactSheetMay2011.pdf
Fund’s Profile:
http://www.gulfbase.com/MutualFund/FundDetail/shuaa-murabaha-fund/shuaa-capital-shuaa/united-arab-
emirates/431?pageID=160

Shuaa Murabaha Fund

Investment and protection strategy

The Fund’s manager tends to allocate •
the initial capital to different maturities
and conservative Islamic money market
instruments while maintaining liquidity and
achieving competitive returns.
To preserve the capital, the fund seeks •
to invest in conservative tools including
Murabaha, Ijarah, recognized Sukuk, and
Shari’ah-complaint transactions in the
Kingdom of Saudi Arabia and the GCC.
The fund can allocate up to 20% to Sukuk •
issued by sovereign, semi-government and
corporate entities with a good reputation
and stable financial standing.1

Financial institution:	  The fund is
managed by SHUAA Capital Saudi
Arabia.
Inception date:	  12th January 2010.
Investment Objective:	  The fund
objective is to preserve capital
through investing in Murabaha
deposits and Sukuk in Saudi Arabia
and the rest of the GCC.
Type of assets:	  Trade finance/
Murabahah.

204 Capital Protected Funds Survey

1  L
is

te
d

in
 S

au
di

 S
to

ck
 E

xc
ha

ng
e

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ad

aw
ul

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w

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.ta

da
w

ul
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om
.s

a

Pr
ofi

le
 s

um
m

ar
y



Fu
nd

 n
am

e
Ty

pe
 o

f a
ss

et
Ty

pe
 o

f
fu

nd

Su
bs

cr
ip

ti
on

/
Re

de
m

pti
on

 F

re
qu

en
cy

Pr
ot

ec
ti

on
 te

ch
ni

qu
e

Va
lu

ati
on

 M
et

ho
d

Se
co

nd
ar

y
 tr

ad
in

g

Sh
ua

a
M

ur
ab

ah
a

Fu
nd

Tr
ad

e
Fi

na
nc

e
M

ur
ab

ah
ah

:
Sa

fe
 a

ss
et

s:
 M

ur
ab

ah
ah

 tr
an

sa
cti

on
s,

an

d
to

 a
 le

ss
er

 e
xt

en
t S

uk
uk

 a
nd

 Ij
ar

ah

in
st

ru
m

en
ts

 a
nd

 C
as

h.

O
pe

n-
en

de
d

N
/A

In
ve

sti
ng

 in
 M

ur
ab

ah
a

Tr
an

sa
cti

on
s:

N
ea

rl
y

97
%

 o
f t

he
 fu

nd
’s

po

rtf
ol

io
 w

as
 in

ve
st

ed
 in

M

ur
ab

ah
ah

 D
ep

os
its

.

N
/A

Ye
s1

205Capital Protected Funds Survey

1 Sources:
Prospectus:
http://www.albiladinvest.com/en/Murabiha_Terms_Condition.pdf
Fund’s Profile:
http://www.albiladinvest.com/en/murabeh_Invest.asp?TabId=3&ItemId=33

Al-Murabih SAR Murabaha Fund

Investment strategy

The fund is ideal for investors who look for:•
Secure yet lucrative investment.o

Low risk factor with high liquidity o
holding.

Short and medium term investments o
in Shari’ah compliant investments.

Protection strategy:
As part of capital protection strategy, the •
fund invests primarily in short to medium
term low risk investments.
In fact, the deposited capital is invested in •
commercial Murabahah transactions which
includes the purchasing of different types
of common commodities - except Gold and
Silver - and then sell it at a price exceeding
the purchase price to make a profit.
The fund might also place some of the capital •
in Sukuk issued by high credit institutions (whether in KSA or the other GCC countries).
For liquidity purposes, Sukuk portion should not exceed 20% of the fund’s assets.1

Financial institution:	  The fund is
managed by Al Bilad Investment
Co.
Inception date:	  1st January 2006.
Investment Objective:	  The fund
seeks to keep the invested capital
and achieve a reasonable return
through a direct participation in
Murabahah transactions that does
not conflict with the principles of
Shari’ah.
Type of assets:	  Trade Finance /
Murabahah.

206 Capital Protected Funds Survey

1  L
is

te
d

in
 S

au
di

 S
to

ck
 E

xc
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ng
e

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ad

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da
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ul
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om
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a

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ofi

le
 s

um
m

ar
y

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Fu
nd

 n
am

e
Ty

pe
 o

f a
ss

et
Ty

pe
 o

f
fu

nd

Su
bs

cr
ip

ti
on

/
Re

de
m

pti
on

 F

re
qu

en
cy

Pr
ot

ec
ti

on
 te

ch
ni

qu
e

Va
lu

ati
on

 M
et

ho
d

Se
co

nd
ar

y
 tr

ad
in

g

A
l-M

ur
ab

ih
 S

A
R

M
ur

ab
ah

a
Fu

nd

Tr
ad

e
Fi

na
nc

e
M

ur
ab

ah
ah

:
Sa

fe
 a

ss
et

s:
 M

ur
ab

ah
ah

tr

an
sa

cti
on

s,
 S

uk
uk

 (l
es

s
th

an
 2

0%
),

an
d

ca
sh

.

O
pe

n-
en

de
d

N
/A

In
ve

sti
ng

 in
 M

ur
ab

ah
ah

tr

an
sa

cti
on

s:
At

 le
as

t 8
0%

 o
f f

un
d’

s
as

se
ts

ar

e
in

ve
st

ed
 in

 M
ur

ab
ah

ah

tr
an

sa
cti

on
s.

Th
e

N
AV

 w
ill

 b
e

ca
lc

ul
at

ed

on
 a

 d
ai

ly
 b

as
is

 u
si

ng

Fo
rw

ar
d

Pr
ic

in
g.

Ye
s1

207Capital Protected Funds Survey

1 Sources:
Prospectus:
http://www.riyadcapital.com/MutualFundTandC/en/AlHadiShariaCompliantFund.pdf
Factsheet:
http://www.riyadcapital.com/MutualFundPerformance/en/AlHadiShariaCompliantFund.pdf

Al Hadi Sharia Compliant Fund

Investment and protection strategy

The Fund invests mainly in the existing local •
and international funds of Riyad Capital
compliant to Shari’ah criteria set by the
Shari’ah Committee of Riyad Capital.
The fund allocates its assets as follows: •

Around 90% in commodity trading o
funds.

Around 10% in local & international o
equities funds.

The Fund manager will have absolute •
discretion to overweight or underweight
asset classes of the indicated weightings.
The fund manager has full option to increase •
or decrease the weight of any region or
market in the portfolio.
The Fund manager will review the history •
of such assets, recommendations of
international investment institutions, his
own evaluation of the markets, price momentum, companies’ earnings, economic
factors, performance outlook and correlations of markets and funds. The fund manager
shall monitors political and economic conditions on a daily basis and adjusts his strategy
accordingly.1

Financial institution:	  The fund
is managed by Riyad Capital
Company.
Inception date:	  31st December
2002.
Investment Objective:	  The fund
aims to achieve short term capital
preservation and to realize a
competitive rate of return within
low risk level.
Type of assets:	  Mixed assets-
Cautious.

208 Capital Protected Funds Survey

1  A
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or

 th
e

ye
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nd

ed
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Fu
nd

 n
am

e
Ty

pe
 o

f a
ss

et
Ty

pe
 o

f
fu

nd

Su
bs

cr
ip

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Re

de
m

pti
on

 F

re
qu

en
cy

Pr
ot

ec
ti

on
 te

ch
ni

qu
e

Va
lu

ati
on

M

et
ho

d
Se

co
nd

ar
y

 tr
ad

in
g

A
l H

ad
i S

ha
ri

a
Co

m
pl

ia
nt

 F

M
ix

ed
 a

ss
et

s-
Ca

uti
ou

s:
Sa

fe
 a

ss
et

s:
 C

om
m

od
ity

tr

ad
in

g
fu

nd
s

an
d

ca
sh

.
Ri

sk
y

as
se

ts
: L

oc
al

 &

in
te

rn
ati

on
al

 e
qu

ity
 fu

nd
s.

O
pe

n-
en

de
d

N
um

be
r

of
 u

ni
ts

 a
s

at

31
st

 D
ec

em
be

r
20

10
:1

Cr
ea

te
d:

 2
,2

13
,8

17
.8

1
Ca

nc
el

le
d:

 1
63

,7
65

.5
8

A
 V

ar
ia

ti
on

 o
f C

PP
I:

1-
 9

0%
 o

f t
he

 a
ss

et
s

ar
e

he
ld

 in

co
m

m
od

ity
 tr

ad
in

g
fu

nd
s

an
d

10
%

 in

lo
ca

l a
nd

 in
te

rn
ati

on
al

 e
qu

ity
 F

un
ds

.
2-

 T
he

 w
ei

gh
tin

g
of

 e
ac

h
as

se
t t

yp
e

co
ul

d
be

 a
dj

us
te

d
in

 o
rd

er
 to

 a
ch

ie
ve

th

e
fu

nd
’s

 o
bj

ec
tiv

es
.

Va
lu

ati
on

s
sh

al
l

be
 p

er
fo

rm
ed

on

 M
on

da
y

an
d

W
ed

ne
sd

ay

w
ee

kl
y

an
d

ac
co

rd
in

g
to

cl

os
in

g
pr

ic
es

.

Ye
s2

209Capital Protected Funds Survey

Su
m

m
ar

y
of

 I
sl

am
ic

 C
ap

it
al

 p
ro

te
ct

ed
 f

un
ds

 s
ur

ve
y

c.
 Fu

nd
 n

am
e

Ty
pe

 o
f a

ss
et

Ty
pe

 o
f

fu
nd

Su
bs

cr
ip

ti
on

/
Re

de
m

pti
on

 F

re
qu

en
cy

Pr
ot

ec
ti

on
 te

ch
ni

qu
e

Va
lu

ati
on

 M
et

ho
d

Se
co

nd
ar

y
 tr

ad
in

g

Kuwait

N
BK

 Is
la

m
ic

Ija

ra
h

fu
nd

 V
III

Ija
ra

h
as

se
ts

:
Eq

ui
pm

en
t l

ea
se

s.
Cl

os
e-

en
de

d
N

/A

In
ve

sti
ng

 in
 re

la
ti

ve
ly

 s
af

e
as

se
ts

 (I
ja

ra
h)

:
Pr

ot
ec

tio
n

is
 e

ns
ur

ed
 b

y
in

ve
sti

ng
 in

 a

fu
nd

 th
at

 re
lie

s
on

 h
ig

h
cr

ed
it

qu
al

ity

eq
ui

pm
en

t l
ea

se
s.

N

/A
N

o

Kuwait

G
lo

ba
l I

sl
am

ic

Fu
nd

Fi
xe

d
In

co
m

e:
Sa

fe
 a

ss
et

s:
 L

oc
al

an

d
in

te
rn

ati
on

al

G
ov

er
nm

en
ta

l a
nd

Co

rp
or

at
e

fix
ed

 in
co

m
e

se
cu

ri
tie

s,
 M

on
ey

m

ar
ke

t i
ns

tr
um

en
ts

.

O
pe

n-
en

de
d

N
/A

In
ve

sti
ng

 in
 s

af
e

as
se

ts
:

Th
e

Fu
nd

 in
ve

st
s

in
 F

ix
ed

 in
co

m
e

se
cu

ri
tie

s,
 m

ai
nl

y
w

ith
in

 g
ov

er
nm

en
ta

l/
se

m
i-g

ov
er

nm
en

ta
l c

ou
nt

er
pa

rti
es

 a
nd

hi

gh
ly

 s
ol

ve
nt

 c
or

po
ra

te
 in

sti
tu

tio
ns

.

Th
e

N
AV

 o
f t

he
 fu

nd
 is

•

ca
lc

ul
at

ed
 o

n
a

w
ee

kl
y

ba
si

s
us

in
g

fo
rw

ar
d

pr
ic

in
g.

Th
e

m
ot

he
r

co
m

pa
ny

 is

lis
te

d
on

 th
e

Ku
w

ai
t S

to
ck

Ex

ch
an

ge
 b

ut

th
e

Fu
nd

 w
as

no

t f
ou

nd
.

Pakistan

M
ee

za
n

Ca
pi

ta
l

Pr
ot

ec
te

d
Fu

nd

- I
I

M
ix

ed
 a

ss
et

s:
Sa

fe
 a

ss
et

s:
 G

ov
er

nm
en

t
Ija

ra
h

Su
ku

k,
 b

an
k

de
po

si
ts

, c
as

h
an

d
ca

sh

eq
ui

va
le

nt
.

Ri
sk

y
as

se
ts

: L
is

te
d

eq
ui

ty
 s

ec
ur

iti
es

.

O
pe

n-
en

de
d

A
s

th
e

fu
nd

 w
as

cr

ea
te

d
in

 Ju
ly

 2
01

1,

un
its

 a
re

 s
til

l i
n

is
su

an
ce

 s
ta

te
:

7,
90

0,
19

9
un

its
 h

av
e

be
en

 is
su

ed

In
ve

sti
ng

 in
 s

af
e

as
se

ts
:

Th
e

fu
nd

 a
do

pt
s

a
st

ati
c

he
dg

in
g

st
ra

te
gy

by

 h
ol

di
ng

 to
 m

at
ur

ity
 “A

A
A”

 g
ov

er
nm

en
t

Ija
ra

h
Su

ku
k

th
at

 c
on

sti
tu

te
s

75
.5

%
 o

f t
he

N

AV
.

Th
e

N
AV

 o
f t

he
 fu

nd
 is

•

ca
lc

ul
at

ed
 o

n
a

da
ily

ba

si
s

us
in

g
fo

rw
ar

d
pr

ic
in

g
m

et
ho

d

Ye
s

Pakistan

H
BL

 Is
la

m
ic

M

on
ey

 M
ar

ke
t

Fu
nd

Is
la

m
ic

 M
on

ey
 M

ar
ke

t
in

st
ru

m
en

ts
 (I

M
M

I)
:

Ce
rti

fic
at

e
of

 Is
la

m
ic

In

ve
st

m
en

ts
, C

er
tifi

ca
te

of

 D
ep

os
its

 a
nd

ot

he
r

m
on

ey
 m

ar
ke

t
in

ve
st

m
en

t t
oo

ls
.

O
pe

n-
en

de
d

N
um

be
r

of
 u

ni
ts

 a
s

at
 3

0th
 Ju

ne
 2

01
1:

Cr
ea

te
d:

 3
,9

17
,1

60
Ca

nc
el

le
d:

 2
0

In
ve

sti
ng

 in
 h

ig
h

qu
al

it
y

IM
M

I:
Th

e
fu

nd
 im

po
se

s
ce

rt
ai

n
ra

tin
g

cr
ite

ri
a

on
 th

e
se

le
ct

ed
 in

st
ru

m
en

ts
 a

nd
 th

e
in

sti
tu

tio
ns

 in
 w

hi
ch

 it
 in

ve
st

s.

Th
e

N
AV

 o
f t

he
 fu

nd
 is

•

ca
lc

ul
at

ed
 o

n
a

da
ily

ba

si
s

us
in

g
fo

rw
ar

d
pr

ic
in

g
m

et
ho

d

Ye
s

210 Capital Protected Funds Survey

Pakistan

M
ee

za
n

Is
la

m
ic

In

co
m

e
Fu

nd

M
ix

ed
 a

ss
et

s:
Sa

fe
 a

ss
et

s:
 G

ov
er

nm
en

t
ba

ck
ed

 /
 G

ua
ra

nt
ee

d
Se

cu
ri

tie
s,

 Ij
ar

ah
 S

uk
uk

,
ba

nk
 d

ep
os

its
, c

as
h.

Ri
sk

y
as

se
ts

:
M

us
ha

ra
ka

h
an

d
M

ud
ar

ab
ah

ar

ra
ng

em
en

ts
 (l

es
s

th
an

1%

)

O
pe

n-
en

de
d

N
um

be
r

of
 u

ni
ts

 a
s

at
 3

0th
 Ju

ne
 2

01
1:

Cr
ea

te
d:

 2
7,

72
9,

22
4

Ca
nc

el
le

d:

47
,7

49
,3

02

In
ve

sti
ng

 in
 h

ig
h

qu
al

it
y

Is
la

m
ic

 in
co

m
e

in
st

ru
m

en
ts

:
G

ov
er

nm
en

t s
ec

ur
iti

es
, I

ja
ra

h
Su

ku
k,

G

ua
ra

nt
ee

d
Se

cu
ri

tie
s.

Th
e

N
AV

 o
f t

he
 fu

nd
 is

•

ca
lc

ul
at

ed
 o

n
a

da
ily

ba

si
s

us
in

g
fo

rw
ar

d
pr

ic
in

g
m

et
ho

d

Ye
s

Malaysia

A
M

B
D

an
a

A
qe

el
-C

ap
ita

l
Pr

ot
ec

te
d

Fu
nd

M
ix

ed
 A

ss
et

s-
Ca

uti
ou

s
Ri

sk
y

as
se

t:
 L

es
s

th
an

10

%
 in

 e
qu

ity
Sa

fe
 a

ss
et

s:
 Is

la
m

ic
 D

eb
t

in
st

ru
m

en
t 8

5%
) a

nd

ca
sh

 e
qu

iv
al

en
t.

Cl
os

e-
en

de
d

N
/A

In
ve

sti
ng

 in
 s

af
e

as
se

ts
:

Th
e

fu
nd

 a
do

pt
s

a
st

ati
c

he
dg

in
g

st
ra

te
gy

by

 h
ol

di
ng

 to
 m

at
ur

ity
 h

ig
h

qu
al

ity
 lo

ca
lly

is

su
ed

 S
uk

uk
 th

at
 c

on
sti

tu
te

 8
5%

 to
 9

8%

of
 th

e
N

AV
.

Th
e

N
AV

 o
f t

he
 fu

nd
 is

•

ca
lc

ul
at

ed
 o

n
a

da
ily

ba

si
s

us
in

g
fo

rw
ar

d
pr

ic
in

g
m

et
ho

d

N
o

Malaysia

A
SM

 S
ya

ri
ah

Ca

pi
ta

l P
ro

te
ct

ed

Se
ct

or
 L

in
ke

d
Fu

nd

M
ix

ed
 A

ss
et

s-
Ca

uti
ou

s:
Sa

fe
 a

ss
et

s:
 IN

ID
s,

 L
iq

ui
d

as
se

ts
.

Ri
sk

y
as

se
ts

: E
qu

iti
es

of

 v
ar

io
us

 s
ec

to
rs

(id

en
tifi

ed
 a

s
le

ad
er

s
in

th

ei
r

re
sp

ec
tiv

e
se

ct
or

s)
.

Cl
os

e-
en

de
d

N
/A

In
ve

sti
ng

 in
 h

ig
h

qu
al

it
y

Fi
xe

d
in

co
m

e
in

st
ru

m
en

ts
:

N
ot

 le
ss

 th
an

 8
8%

 is
 in

ve
st

ed
 in

 IN
ID

s
is

su
ed

 b
y

pr
em

ie
r

fin
an

ci
al

 in
sti

tu
tio

ns
 in

M

al
ay

si
a.

Th
e

N
AV

 o
f t

he
 fu

nd

•
is

 c
al

cu
la

te
d

us
in

g
fo

rw
ar

d
pr

ic
in

g
m

et
ho

d.

N
o

Malaysia

CI
M

B-
I

Co
m

m
od

iti
es

St

ru
ct

ur
ed

 F
un

d
2

St
ru

ct
ur

ed
 P

ro
du

ct
s:

D
yn

am
ic

 c
om

m
od

it
y

st
ru

ct
ur

e:
 It

 is
 a

co

m
bi

na
tio

n
of

 m
on

ey

m
ar

ke
t i

ns
tr

um
en

ts
 a

nd

W
a’

ad
 b

as
ed

 s
tr

uc
tu

re
d

pr
od

uc
ts

.

Cl
os

e-
en

de
d

N
um

be
r

of
 u

ni
ts

 a
s

at
 3

0th
 Ju

ne
 2

01
1:

Cr
ea

te
d:

 0
Ca

nc
el

le
d:

86

,3
96

,6
27

In
ve

sti
ng

 in
 1

00
%

 c
ap

it
al

 p
ro

te
ct

ed

St
ru

ct
ur

ed
 P

ro
du

ct
s:

At
 le

as
t 9

5%
 is

 in
ve

st
ed

 in
 “

D
yn

am
ic

co

m
m

od
ity

 s
tr

uc
tu

re
”

is
su

ed
 b

y
CI

M
B,

w

hi
ch

 n
ot

 o
nl

y
en

su
re

s
ca

pi
ta

l p
ro

te
cti

on

bu
t a

ls
o

re
w

ar
ds

 th
e

in
ve

st
or

s
w

ith
 th

e
pe

rf
or

m
an

ce
 o

f t
he

 b
es

t 3
 D

yn
am

ic

In
di

ce
s.

Th
e

N
AV

 o
f t

he
 fu

nd

•
is

 c
al

cu
la

te
d

us
in

g
fo

rw
ar

d
pr

ic
in

g
m

et
ho

d

N
o

211Capital Protected Funds Survey

Saudi Arabia
A

lm
an

ar
ah

Co

ns
er

va
ti

ve

G
ro

w
th

 F
un

d

M
ix

ed
 a

ss
et

s:
Sa

fe
 a

ss
et

s:
 In

ve
st

m
en

ts

in
 M

ur
ab

ah
ah

 &
 S

uk
uk

Fu

nd
s,

 c
as

h
an

d
ca

sh

eq
ui

va
le

nt
.

Ri
sk

y
as

se
ts

:
in

ve
st

m
en

ts
 in

 S
ha

ri
’a

h
Co

m
pl

ia
nt

 e
qu

ity
 fu

nd
s.

O
pe

n-
en

de
d

N
/A

In
ve

sti
ng

 in
 s

af
e

as
se

ts
:

A
bo

ut
 7

5%
 o

f f
un

d’
s

po
rtf

ol
io

 is
 in

ve
st

ed

in
 s

af
e

M
ur

ab
ah

ah
 a

nd
 S

uk
uk

 F
un

ds
.

Th
e

N
AV

 w
ill

•

be
 c

on
cl

us
iv

el
y

de
te

rm
in

ed
 o

n
ev

er
y

D
ea

lin
g

D
ay

 (M
on

da
y

&
 W

ed
ne

sd
ay

) b
as

ed

on
 th

e
la

te
st

 a
va

ila
bl

e
se

cu
ri

ty
 p

ri
ce

s
on

 th
at

D

ea
lin

g
D

ay
.

Ye
s

Saudi Arabia

H
SB

C
A

m
an

ah

M
ul

ti
-A

ss
et

s
D

ef
en

si
ve

 F
un

d

M
ix

ed
 a

ss
et

s-
Ca

uti
ou

s:
Sa

fe
 a

ss
et

s:
 M

ur
ab

ah
ah

&

 S
uk

uk
 fu

nd
s

or

th
ro

ug
h

di
re

ct

in
ve

st
m

en
ts

/
ca

sh
.

Ri
sk

y
as

se
ts

: L
oc

al
 &

in

te
rn

ati
on

al
 e

qu
ity

fu

nd
s

or
 th

ro
ug

h
di

re
ct

in

ve
st

m
en

t.

O
pe

n-
en

de
d

N
/A

A
 v

ar
ia

ti
on

 o
f C

PP
I:

1-
 A

 h
ig

h
pe

rc
en

ta
ge

 o
f t

he
 c

ap
ita

l i
s

in
ve

st
ed

 in
 M

ur
ab

ah
ah

 T
ra

de
 tr

an
sa

cti
on

s
an

d/
or

 Is
la

m
ic

 b
on

ds
 (S

uk
uk

) a
nd

 a

sm
al

le
r

pe
rc

en
ta

ge
 in

 S
ha

ri
’a

h-
co

m
pl

ia
nt

eq

ui
ty

 F
un

ds
.

2-
 T

he
 w

ei
gh

tin
g

of
 e

ac
h

as
se

t t
yp

e
co

ul
d

be
 a

dj
us

te
d

in
 o

rd
er

 to
 a

ch
ie

ve
 th

e
fu

nd
’s

ob

je
cti

ve
s.

Th
e

N
AV

 o
f t

he
 fu

nd

•
is

 c
al

cu
la

te
d

M
on

da
y

an
d

W
ed

ne
sd

ay
 b

as
ed

on

 fo
rw

ar
d

pr
ic

in
g.

Ye
s

Saudi Arabia

In
te

rn
ati

on
al

Tr

ad
e

Fi
na

nc
e

Fu
nd

 (S
un

bu
lla

h
U

SD
)

Tr
ad

e
Fi

na
nc

e
M

ur
ab

ah
ah

:
Sa

fe
 a

ss
et

s:

In
te

rn
ati

on
al

 T
ra

de

Fi
na

nc
e

Tr
an

sa
cti

on
s,

M

on
ey

 M
ar

ke
t

in
st

ru
m

en
ts

, S
uk

uk
 (l

es
s

th
an

 2
0%

),
an

d
ca

sh
.

O
pe

n-
en

de
d

N
um

be
r

of
 u

ni
ts

 a
s

at
 3

1st
 D

ec
em

be
r

20
10

:
Cr

ea
te

d:

1,
43

2,
28

1.
79

Ca
nc

el
le

d:

1,
28

4,
42

7.
37

In
ve

sti
ng

 in
 M

ur
ab

ah
ah

 tr
an

sa
cti

on
s:

N
ea

rl
y

96
%

 w
as

 in
ve

st
ed

 in
 C

om
m

od
ity

an

d
En

er
gy

 M
ur

ab
ah

ah
.

Th
e

N
AV

 w
ill

 b
e

•
ca

lc
ul

at
ed

 o
n

a
da

ily

ba
si

s
us

in
g

Fo
rw

ar
d

Pr
ic

in
g.

Ye
s

Saudi Arabia

Sh
ua

a
M

ur
ab

ah
a

Fu
nd

Tr
ad

e
Fi

na
nc

e
M

ur
ab

ah
ah

:
Sa

fe
 a

ss
et

s:
 M

ur
ab

ah
ah

tr

an
sa

cti
on

s,
 a

nd
 to

 a

le
ss

er
 e

xt
en

t S
uk

uk
 a

nd

Ija
ra

h
in

st
ru

m
en

ts
 a

nd

Ca
sh

.

O
pe

n-
en

de
d

N
/A

In
ve

sti
ng

 in
 M

ur
ab

ah
ah

 tr
an

sa
cti

on
s:

N
ea

rl
y

97
%

 o
f t

he
 fu

nd
’s

 p
or

tf
ol

io
 w

as

in
ve

st
ed

 in
 M

ur
ab

ah
ah

 D
ep

os
its

.
N

/A
Ye

s

Saudi Arabia

A
l-M

ur
ab

ih
 S

A
R

M
ur

ab
ah

a
Fu

nd

Tr
ad

e
Fi

na
nc

e
M

ur
ab

ah
ah

:
Sa

fe
 a

ss
et

s:
 M

ur
ab

ah
ah

tr

an
sa

cti
on

s,
 S

uk
uk

 (l
es

s
th

an
 2

0%
),

an
d

ca
sh

.

O
pe

n-
en

de
d

N
/A

In
ve

sti
ng

 in
 M

ur
ab

ah
ah

 tr
an

sa
cti

on
s:

At
 le

as
t 8

0%
 o

f f
un

d’
s

as
se

ts
 is

 in
ve

st
ed

 in

M
ur

ab
ah

ah
 tr

an
sa

cti
on

s.

Th
e

N
AV

 w
ill

 b
e

•
ca

lc
ul

at
ed

 o
n

a
da

ily

ba
si

s
us

in
g

Fo
rw

ar
d

Pr
ic

in
g.

Ye
s

212 Capital Protected Funds Survey

Saudi Arabia

A
l H

ad
i S

ha
ri

a
Co

m
pl

ia
nt

 F
un

d

M
ix

ed
 a

ss
et

s-
Ca

uti
ou

s:
Sa

fe
 a

ss
et

s:
 C

om
m

od
ity

tr

ad
in

g
fu

nd
s

an
d

ca
sh

.
Ri

sk
y

as
se

ts
: L

oc
al

 &

in
te

rn
ati

on
al

 e
qu

ity

fu
nd

s.

O
pe

n-
en

de
d

N
um

be
r

of
 u

ni
ts

 a
s

at
 3

1st
 D

ec
em

be
r

20
10

:
Cr

ea
te

d:

2,
21

3,
81

7.
81

Ca
nc

el
le

d:

16
3,

76
5.

58

A
 V

ar
ia

ti
on

 o
f C

PP
I:

1-
 9

0%
 o

f t
he

 a
ss

et
s

ar
e

he
ld

 in

co
m

m
od

ity
 tr

ad
in

g
fu

nd
s

an
d

10
%

in

 lo
ca

l a
nd

 in
te

rn
ati

on
al

 e
qu

ity

Fu
nd

s.
2-

 T
he

 w
ei

gh
tin

g
of

 e
ac

h
as

se
t t

yp
e

co
ul

d
be

 a
dj

us
te

d
in

 o
rd

er
 to

ac

hi
ev

e
th

e
fu

nd
’s

 o
bj

ec
tiv

es
.

Va
lu

ati
on

s
sh

al
l b

e
•

pe
rf

or
m

ed
 o

n
M

on
da

y
an

d
W

ed
ne

sd
ay

w

ee
kl

y
an

d
ac

co
rd

in
g

to
 c

lo
si

ng
 p

ri
ce

s

Ye
s

Ta
bl

e
24

: S
um

m
ar

y
of

 Is
la

m
ic

 C
ap

it
al

 P
ro

te
ct

ed
 F

un
d

Su
rv

ey

213Capital Protected Funds Survey

Summaryd.

In this survey, we explored 58 capital protected funds, 14 of which are Islamic. The
remaining 44 funds belong to four different geographical areas: 10 European funds, 11 American
funds, 17 Asiatic funds and 6 funds from the MENA zone. More than 65% of funds (38 of 58) are
open-ended1.

Although each fund uses a slightly different protection technique combination, we
generally notice that the protection techniques adopted by funds are not very different from one
geographical region to another. For European and American funds, almost 30% use a variation
of Bond+ Call Option, 50% use a variation of CPPI and 20% invest in relatively safe assets. Asian
funds are slightly different. Only 11% and 29% of those funds use a variation of Bond+Call Option
and CPPI, respectively. Most of the Asian funds (almost 53%) invest in relatively safe assets.
It should be noted that the “Liontamer Fallen Angels Series1 (Trust 26)-Booster” fund, a New-
Zealand fund, uses a variation of third party protection agreement — i.e. the fund buys financial
assets from a Fund asset Provider, which is the KBC Bank. This Fund asset provider is liable to pay
index-linked returns and to ensure the 90% capital protection. MENA funds, a contrario, do not
use the Bond+Call Option protection technique: 50% of those funds use a variation of CPPI while
the other 50% invest in safe assets.

Since they are governed by an ethical system that hold, inter alia, all Riba and Gharar
to be sinful, the Islamic protected funds do not use the Bond+Call Option technique for hedging
purposes. They use either a variation of CPPI (2 out of 14) or they invest in safe assets (8 out of
14) or in Murabahah transactions (3 out of 14). The “CIMB-I Commodities Structured Fund 2”
fund, a Malaysian fund, uses a different protection technique. It invests in 100% capital protected
structured products: At least 95% is invested in “Dynamic Commodity Structure” issued by CIMB,
which not only ensures capital protection but also rewards the investors with the performance
of the three best Dynamic Indices.

1 Only the final selected funds are discussed.

214 Capital Protected Funds Survey

ConclusionXII.

The concept of Capital protection has evolved over time. Every generation of capital
protected products arrived with new mechanisms thanks to which limitations of the predecessors
are addressed. Hence, during the three last decades the industry has gone through Bond + Call
Option protection strategy, CPPI and Dynamic Hedging. It has strengthened them with additional
protection layers and new combinations and variations. Generally, most of the conventional
funds (non-Islamic) were found to build their protection upon two layers: the first layer reposes
on one of the main protection mechanisms while the second either consists of a third party
protection agreement or derivatives for hedging purposes. The global financial crisis, as were
previous downturns, was a turning point in the history of capital protected funds. Not only did
it boost the demand for such products but it also pushed the issuers to draw lessons from the
pitfalls of the latest funds and to build more customized solutions for the clients. The survey
revealed, wherever data allows it, that most of the funds established post-2008 are of relatively
short investment terms, that they propose innovative features like CPPI with dynamic protection
floor and that some of them cope with the cash lock-out feature by allowing early withdrawals
without incurring redemptions costs. Interestingly, the survey also showed that some debt funds
were labeled as capital protected, which leads to the conclusion that investing exclusively in high
debt instruments is also considered by some fund managers as part of the protection tools. The
absence of a universal definition of the capital protected fund composition resulted in different
definitions given by the selected funds issuers.

Some regions proved to be more responsive to the capital protection concept than
others. Europe undeniably has the stronghold of capital protected funds. As far as total net
assets are concerned, the region shows the highest average value which is estimated at $61
million. A large number of highly performing protected funds operate there and regulation has
been sufficiently developed to impose the adequate transparency requirements for protecting
investors’ interests. Capital protection is remarkably sophisticated in the old continent where the
CPPI combined with dynamic protection floor has been applied since 1998. Protection techniques
as well as the asset classes are fairly diversified across the region.

Though the idea of capital protection was first developed in the USA in the late 80’s, it
witnessed great success in Asia, more than America or USA itself. Overall, the capital protected
funds industry is quite recent in Asia as compared to Europe or America. Though the oldest
Australian fund in the survey was launched in 1993, most of the other Asian countries hosted
these products only in the 2000’s. Nevertheless, it seems that the appetite for protected funds
is evident and it is expected to increase as a result of the recent financial crisis, as issuers
become more innovative, especially in Australia and New Zealand. Apart from these two
countries, the level of sophistication of protection techniques is clearly substandard in Asia. This
underdevelopment is largely due to regulatory restrictions. India, where protected funds are
obliged to follow closed-end structures and place the majority of the portfolio in highly rated
debt instruments is an example. In Malaysia, the funds have certain features: they are short term
and they all utilize Bond + Call Option model. Though the surveyed Singaporean funds invest
in safe debt assets, they become more sophisticated when they extend their protection with
interest rate or total return swaps. There is diversity in the types of assets in the region except for
Malaysia and India, where cautious mixed assets and bonds dominate. As data related to total
net assets are not available for most of the funds, it was not possible to underline an estimation
of the average protected funds size in the region.

215Capital Protected Funds Survey

Protected funds in America are not as abundant as in Europe or Asia. The average
protected funds’ Net Asset Value (NAV) is estimated at $60.36 million, benefitting from the
performance of global financial institutions that stand behind Latin American funds, while that
of North American funds value does not exceed $45 million. Occasional efforts made to launch
these kinds of funds have met with only limited success, especially in USA. With regards to the
protection techniques, Bond + Call Option, CPPI and safe assets investments were utilized with
some variations. Where most of the funds are listed and open-ended, there is a wide diversity in
the types of assets, it seems that each country in America tends to favor a particular protection
model. USA funds, for example, apply the CPPI strategy combined with a third party protection
agreement. Brazil funds, for their part, lean more towards to the Bond + Call Option approach.
And the best performing Mexican funds have recourse to high quality debt instruments to protect
their capital.

MENA capital protected funds market is far from reaching the level of maturity and
sophistication of the other regions. The mutual fund industry is in its nascent stage and so
is the capital protected fund sector, if not worse. The very few funds we found and whose
documentation is available - though it is not well elaborated - show that protection techniques
are rather basic: it is either through investing in safe assets or CPPI combined with derivatives
for hedging purposes, while Bond + Call Option model was not detected at all. Assets are either
mixed due the use of CPPI or are in the form of bonds.

Islamic protected funds industry is very trivial as compared to its conventional counterpart.
Although there were modest experiments dating back to 1990s, it effectively started in 2006
during the Gulf markets crash, hence resulting in more than 20 years of delay. Saudi Arabia has
the largest Islamic capital protected funds base, both in terms of the number and size of funds.
The largest Saudi funds are managed by the most prominent financial institutions in MENA.
Malaysia comes second in terms of importance, followed by Pakistan. The average value of
Islamic protected funds is around $47 million and it is largely supported by the contribution of
the Saudi funds. So far, Islamic capital protection reposes fundamentally on basic tools, mainly
Murabahah transactions and Sukuk. These take place principally in static cautious investments
and in trade financing. Islamic protected products do not offer as much diversity in their asset
classes and did not prove to be innovative in designing new features or client-centered solutions.
They seldom utilize dynamic asset allocation, when Ijarah is not widely deployed although it has
an inbuilt capital protection. CPPI with its different variations can be easily adapted to fit with the
Islamic context, yet it has rarely been noticed in this survey. In short, the Islamic protected funds
industry follows its own trajectory: it is very conservative and it does not encourage controversial
imitations. Structured products were utilized only once in this survey whereas the “Islamic Bond
+ Call Option” was never encountered.

216 Capital Protected Funds Survey

Annexes XIII.

Participation Rate 1.

In addition to returning the initial investment, some protected funds offer a certain
percentage of the increase in the value of the underlying on the maturity date. The underlying
could be:

A single stock market index or a basket of stock market indices;•
A basket of individual shares;•
Or some other combinations.•

The amount that will ultimately be received by the investor could only be known on the
maturity date. When the fund is launched, how closely the underlying will be tracked is specified
as a percentage (for example 100%). It is referred to as “the participation rate”.

An illustration

A fund offering 100% capital protection at maturity + 100% of the increase in the European
stock market index, DJ Euro Stoxx 50. Thus, the fund performance depends on two variables:

The participation rate, which in this case is 100%•
The underlying stock market index, in this case the DJ Euro Stoxx 50.•

Positive scenario: Supposing that the index goes up by 80% before the fund matures, the
investor will get a gross return on the final maturity date of 80% (The 80% increase is tracked at
a rate of 100%).

Negative scenario: Supposing that, at maturity, the value of the DJ Euro Stoxx 50 has
fallen below the starting value. There will be no capital gain, but the initial capital will still
be 100% protected.

80

90

100

110

120

130

140

150

160

170

180
Will get 100 % of the increase at maturity

100 % capital protection

Maturity date

Negative Scenario

Positive Scenario

An illustrative formula:

- 100% capital protection
on the final maturity date.

- 100% of the increase at
maturity.

Figure 17: An illustration of a participation rate

217Capital Protected Funds Survey

Lookback option 2.

The fund performance on the maturity date is determined by the difference between
the starting value and the closing value of the portfolio. The Lookback is a formula that optimizes
(lowers) the starting value after the launch of the fund. Formulas like these are expensive, which
means the participation rate offered will be lower. Therefore, they will only be used if stock
markets are uncertain in the short term.

80

90

100

110

120

130

140

150

160

value

lookback period Capital gain=
(150-90)/100=60%

New starting

Lookback formula:

s t a r t i n g  v a l u e .
(=100),  divided by the
period if < starting value
d u r i n g  t h e  L o o k b a c k
l e s s  t h e  l owe st  va l u e
closing value of the basket
-The capital gain = the

on the final maturity date
-100% capital protection

Figure 18: An illustration of a lookback option

With the Lookback formula, the fund’s performance on maturity depends on the increase
in the value of the share basket relative to the lookback value. This is the lowest value of the
underlying index/basket during a specific period after the launch of the fund (the Lookback
period). Hence, this technique is said to optimize the starting value.

Lipper 3.

Lipper, a Thomson Reuters company, is a supplier of mutual funds information, analytical
tools and commentary. Lipper’s benchmarking and classifications are widely recognized as the
industry standard by asset managers, fund companies and financial intermediaries. Overall,
Lipper provides fund data, fund awards designations and rating information.

Lipper Leader Rating Systema.

The system helps to guide investors and their advisors in selecting funds that suit
individual investment styles and goals. The ratings are derived from formulas that analyze funds
against defined key metrics. Funds are compared to similar funds, and only those that truly stand
out are awarded Lipper Leader status.

Funds are ranked against their peers on each of four metrics: Total Return, Consistent
Return, Preservation and Expense. A fifth measure, Tax Efficiency, applies in the United States.
Scores are subject to change every month and are calculated for the following periods: 3-years,
5-years, 10-years, and overall. The overall calculation is based on an equal-weighted average of
percentile ranks for each measure over 3-year, 5-year, and 10-year periods.

218 Capital Protected Funds Survey

For each measure, the highest 20% of funds in each peer group are named Lipper
Leaders. The next 20% receive a rating of 4; the middle 20% are rated 3; the next 20% are rated
2, and the lowest 20% are rated 1.

Lipper Leaders are updated monthly. Lipper Leaders and the Lipper Leader Fund Count
file are updated by the evening of the 7th business day of each month.

Lipper Leader measures are available for several countries. For more about Lipper
Leaders and screen for funds: www.lipperleaders.com

Total Returnb.

Lipper Leader ratings for total returns reflect funds’ historical total return performance
relative to peers. Ratings for Total Return are computed for all Lipper classifications with five
or more distinct portfolios and span both equity and fixed-income funds (e.g., large-cap core,
general U.S. Treasury, etc.).

Lipper Leaders for Total Return may be the best fit for investors who want the best
historical return, without looking at risk. This measure alone may not be suitable for investors
who want to avoid downside risk. For more risk-averse investors, Total Return ratings can be
used with Preservation and/or Consistent Return ratings to make an appropriate selection that
balances the risk and return. For more about Lipper Leader ratings for Total Return:

http://www.lipperweb.com/research/TotalReturn.aspx

Morningstar 4.

Morningstar, Inc. is a leading provider of independent investment research in North
America, Europe, Australia and Asia. It offers a line of products and services for individuals,
financial advisors and institutions.

Operating in 27 countries, Morningstar provides data on more than 380,000 investment
offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market
data on more than 8 million equities, indexes, futures, options, commodities, and precious
metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment
management services and has more than $190 billion in assets under advisement or management
as of March 31, 2012. Overall, Morningstar accounts for 16 investing websites, each belonging to
a specific country or a region: Asia, Australia, Belgium, Canada, Chile, Denmark, France, Germany,
Italy, Mexico, The Netherlands, New Zealand, Norway, Spain, U.K and USA.

Regarding products for individual investors, the company proposes Morningstar Fund
Screener. It screens thousands of funds using custom or preset criteria based on hundreds of
financial data points to find the funds that will fit best in a portfolio. Screening criteria differ from
one country website to another. For more about Morningstar see: www.morningstar.com

219Capital Protected Funds Survey

http://www.lipperleaders.com

http://www.lipperweb.com/research/TotalReturn.aspx

http://www.morningstar.com/

Exchange rates  5.

To be able to compare the capital protected funds sizes across countries and across
regions, we decided that it would be practical to convert all the currencies to the US Dollar. The
rate used is the average rate for March 2012 (22 days), as the data related to “Total Net Assets”
was collected during that month and onward.1

USD average rate of March 2012

Euro 1.3201

GBP 1.58194

CHF 1.09454

CZK 0.0534985

CAD 1.00611

BRL 0.557857

CLP 0.00205756

MXN 0.0784704

NZD 0.819787

AUD 1.05303

KRW 0.000887308

SGD 0.794078

RM 0.328172

PKR 0.0110108

INR 0.0198422

EGP 0.16566

TND 0.6625

KD 3.59414

SAR 0.266667

Euro 1.3201

GBP 1.58194

CHF 1.09454

CZK 0.0534985

CAD 1.00611

BRL 0.557857

CLP 0.00205756

MXN 0.0784704

NZD 0.819787

AUD 1.05303

KRW 0.000887308

Table 25: Exchange rates applied for USD conversion

1 The exchange rates were collected from http://www.x-rates.com/ ,except for Egypt and Tunisia where we
calculated the average rates for March 2012 based on the daily rates of http://www.exchangerates.org.uk/

220 Capital Protected Funds Survey

Key termsXIV.

Bai Al-Urboon

Bai Al-Urboon is used to replicate the outcome of a call option. A small
percentage of the initial capital will be used to purchase “Islamic options”
over a basket of Shari’ah compliant commodities or shares. While Bai
Al-Urboon is intended to take exposure of these markets, the profits
generated by Murabahah transactions are used to compensate for the lost
option payment, hence protecting the capital.

Capital guaranteed
fund

In such funds, investors are guaranteed, by the issuing institution, to
receive their initial contribution.

Capital protected
fund

Such funds promise to protect, but does not guarantee, the full (or a
partial) repayment of initial investments.

Capital protection
agreement

Also referred to as ‘capital protection insurance’ or ‘warranty’. It is used
as an additional protection layer. Literally, insurance is provided by a third
party to the fund through which the latter is liable to repay the initial
investment amount in the event of loss.

Closed-end fund A fund that has a fixed number of shares outstanding and does not redeem
shares the way “open-ended” funds do.

Dynamic
protection floor

CPPI with Dynamic protection floor works as follows: if the NAV per unit
rises, the floor is increased as the NAV is updated to be equal to a certain
percentage of the new NAV (e.g 90%).This is in order to limit the down-side
risk of the units to a given percentage, not only of the initial issue price,
but also of the highest NAV which has been achieved. In other words, it
helps to protect the gains achieved so far by the fund.

ETF Exchange Traded Fund is a fund that tracks an index but is bought and sold
as a listed company.

Forward pricing

It is a valuation process for open-end mutual fund transactions in which
the mutual fund itself is constantly issuing and redeeming shares. As
stipulated by the Securities and Exchange Commission, forward pricing
consists of processing buy and sell orders for open-ended fund shares at
the NAV of the next market close.
This occurs because open-ended mutual funds revalue their assets after
market closes each trading day. Consequently, any mutual fund order
placed by an investor can’t be quoted at a previous NAV. Instead, it must
be given according to the next computed NAV to reflect the changes that
may have occurred in the fund composition since the previous valuation.

Fund of funds A fund that can invest in other funds.

Geared capital
protection

Or ‘leveraged capital protected products’. Refers to borrowing in order to
invest in capital protected products. This is widely practiced in Australia.

Growth fund

A mutual fund whose aim is to achieve capital appreciation by investing
in growth stocks. The portfolio comprises companies with above
average growth in earnings that reinvest their earnings into expansions,
acquisitions, and/or R&D. Companies that pay dividends are usually
excluded. The potential for capital appreciation comes at above average
risk. Besides, most growth funds are more volatile than other types of
funds; rising more in bull markets and falling more in bear markets.

221Capital Protected Funds Survey

Income fund

A mutual fund that emphasizes current income rather than emphasizing
on capital appreciation. Such funds hold a variety of government,
municipal and corporate debt obligations, preferred stock, money market
instruments, and dividend-paying stocks. Share prices of income funds are
not fixed; they tend to fall when interest rates are rising and increase when
interest rates are falling. Generally, the bonds included in the portfolio
are of investment grade. The other securities are of sufficient credit
quality to assure preservation of capital. Income funds are considered
to be conservative investments, they are popular with retirees and other
investors who are looking for a steady cash flow without assuming too
much risk.

Index fund

A mutual fund whose investment objective is to achieve approximately the
same return as a particular market index, such as the S&P 500 Composite
Stock Price Index. An index fund will attempt to achieve its investment
objective primarily by investing in the securities (stocks or bonds) of
companies that are included in a selected index. Some index funds may
also use derivatives (such as options or futures) to help achieve their
investment objective. Some index funds invest in all of the companies
included in an index ; others invest in a representative sample of the
companies included in an index. The management of index funds is more
“passive” than the management of non-index funds, because an index
fund manager only needs to track a relatively fixed index of securities. This
usually translates into less trading of the fund’s portfolio, more favorable
income tax consequences (lower realized capital gains), and lower fees
and expenses than more actively managed funds. Because the investment
strategies of an index fund require it to purchase primarily the securities
contained in an index, the fund will be subject to the same general risks
as the securities that are in the index. In addition, because an index fund
tracks the securities on a particular index, it may have less flexibility than
a non-index fund to react to price declines in the securities contained in
the index.

Lookback option

The fund performance on the maturity date is determined by the difference
between the starting value and the closing value of the portfolio. The
Lookback is a formula that optimizes (lowers) the starting value after the
launch of the fund.

Net Asset Value
(NAV)

A mutual fund is valued using the Net Asset Value. The NAV per share is
the current market value of the fund’s holding minus its liabilities divided
by the number of shares in issuance.

Open-ended fund
A fund that has a variable capital or when there is no restriction on the
amount of shares the fund will issue. The fund could redeem shares if the
investor wishes to sell them back.

Participation rate

In addition to protecting the initial investment, some protected funds
offer a certain percentage of the increase in the value of the underlying on
the maturity date. How closely the underlying will be tracked is specified
as a percentage (for example 100%). It is referred to as “the participation
rate”.

Umbrella fund
A collective investment scheme, which is a single legal entity but has several
distinct sub-funds, which, in effect, are traded as individual investment
funds.

222 Capital Protected Funds Survey

http://www.investorwords.com/2630/investor.html

http://www.investorwords.com/11188/steady.html

http://www.investorwords.com/768/cash_flow.html

http://www.investorwords.com/4292/risk.html

http://www.sec.gov/answers/indices.htm

http://www.sec.gov/answers/mffees.htm

http://www.sec.gov/answers/mffees.htm

List of TablesXV.
Table 1: Comparison of the 3 main protection techniques ........................................................ 19

Table 2: Europe Pre-selected funds’ aggregation (29th February 2012) ..................................... 26

Table 3: Number of Capital Protected Funds and Funds’ Providers in America ......................... 28

Table 4: America Pre-selected funds aggregation (February 29, 2012: March 31, 2012) .......... 28

Table 5: Asia Pre-selected funds aggregation (February 29, 2012: March 31, 2012) ................. 33

Table 6: MENA Pre-selected funds aggregation (March 2008: March 2012) ............................. 36

Table 7: Largest Capital Protected funds within the survey’s pre-selection ............................... 39

Table 8: Largest MENA Investment Fund Families (source: World Bank, 2009) ......................... 40

Table 9: Islamic Pre-selected funds aggregation (February: March 2012) ................................. 40

Table 10: Pre-selection of Europe Capital Protected Funds (February 29, 2012) ....................... 45

Table 11: Final selection of Europe Capital Protected Funds ..................................................... 46

Table 12: Summary of Europe Protected Funds Survey ............................................................. 76

Table 13: Pre-selection of America Capital Protected Funds ..................................................... 78

Table 14: Final selection of America Capital protected Funds ................................................... 79

Table 15: Summary of America Capital Protected Funds Survey ............................................. 106

Table 16: Pre-selection of Asia Capital Protected Funds .......................................................... 109

Table 17: Final selection of Asia Capital Protected Funds ........................................................ 111

Table 18: Summary of Asia Capital Protected Fund Survey ..................................................... 157

Table 19: Pre-selection of MENA Capital Protected Funds ...................................................... 159

Table 20: Final selection of MENA Capital Protected Funds .................................................... 160

Table 21: Summary of MENA Capital Protected Funds Survey ................................................ 175

Table 22: Pre-selection of Islamic Capital Protected Funds ..................................................... 178

Table 23: Final selection of Islamic Capital Protected Funds ................................................... 179

Table 24: Summary of Islamic Capital Protected Fund Survey ................................................. 214

Table 25: Exchange rates applied for USD conversion .............................................................. 221

223Capital Protected Funds Survey

Table of FiguresXVI.
Figure 1: Bond + Option technique ............................................................................................ 15

Figure 2: Constant Proportion Portfolio Insurance ..................................................................... 16

Figure 3: Number of Capital Protected Funds in Europe, March 2003 ....................................... 25

Figure 4: Europe Pre-selected funds’ aggregation (29th February 2012) .................................... 27

Figure 5: America pre-selected funds Aggregation .................................................................... 29

Figure 6: Asia pre-selected funds aggregation (February 29, 2012: March 31, 2012) ............... 33

Figure 7: MENA pre-selected funds aggregation (March 2008: March 2012) ........................... 36

Figure 8: Islamic pre-selected capital protected funds aggregation (February: March 2012) ... 41

Figure 9: Europe final selected funds aggregation ..................................................................... 46

Figure 10: America final selected capital protected funds aggregation ..................................... 79

Figure 11: Asia final selected capital protected funds aggregation ......................................... 110

Figure 12: Investment Strategy of Macquarie Winton Global Opportunities Trust ................. 120

Figure 13: MENA final selected capital protected funds aggregation ...................................... 160

Figure 14: Islamic final selected capital protected funds aggregation ..................................... 179

Figure 15: NBK Islamic Ijarah Fund investment Strategy ......................................................... 181

Figure 16: NBK Islamic KD Ijarah Fund investment Strategy .................................................... 182

Figure 17: An illustration of a participation rate ...................................................................... 217

Figure 18: An illustration of a lookback option ........................................................................ 218

224 Capital Protected Funds Survey

References XVII.

Books1.

Byrne, Nicolas. The European Savings and Investment Outlook-Opportunities in the Wake
of Stock Market Decline, Business Insights, 2004.

Bernstein, Peter, L. Capital Ideas the Improbable Origins of Modern Wall Street, The Free
Press, 1993.

Russell, Ray. An introduction to Fund Management, Chichester, John Wiley & Sons, 2006.

Papers and articles2.

“Analyzing Alternative Funds”. Islamic Finance Asia. October 2010.

“Back to basics-Capital protected products”. Fund Focus. November 2008: Issue3.

“Capital Protected Products Odyssey”. Asset Financial Review. June 2010

“Get the facts: Capital guaranteed or protected investments”. The Australian Securities and
Investments Commission “ASIC”. October 2010.

“Guide to Capital Protected Products”. Fund Focus. August 2010: Issue 2.

“Principal protection- a portfolio protection strategy”. Horizon Investment LLC. 2002

“Review of disclosure for capital protected products and retail structured or derivative
products”. The Australian Securities and Investment Commission “ASIC”. July 2010.

“Survey of asset management industry”. The Monetary Authority of Singapore “MAS”.
December 2002.

Al-Suwailim, Sami, I. Hedging in Islamic Finance, IRTI Occasional Paper No.10, 2008.

Chestler, Russell. “The rise and rise of capital protected products”. Due Diligence Forum
Research. Portfolio Construction Conference 2007.

Hoyle, Simon. “Special report: capital and income protected products”. Professional Planner
Magazine. June 2010: 71-74.

Jobst, Andreas, A. and Juan, Solé. “Operative Principles of Islamic Derivatives – Towards a
Coherent Theory”, IMF Working Papers, WP/12/63, 2012.

Mako, William and Diego Sourouille. “Investment funds in MENA”. The World Bank.
December 2010.

225Capital Protected Funds Survey

Web links3.

http://bourse.investir.fr
http://download.pioneerinvestments.at
http://english.mubasher.info/portal/TDWL/searchMutualFunds.html
http://funds.ft.com
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http://latintrade.com/2010/06/banks-buck-the-crisis
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http://www.afrsmartinvestor.com/p/howto/investing/

are_capital_protection_products_LongT8Le6D0NxIItK9DT1N
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http://www.almalcapital.com
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http://www.ambmutual.com.my
http://www.amf-france.org
http://www.asiaone.com/Business/News/My%2BMoney/Story/A1Story20090909-166674.html
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http://www.asx.com.au
http://www.atlasfunds.com.pk
http://www.axiscapital.com.tn
http://www.axismf.com
http://www.bahrainbourse.net
http://www.bloomberg.com
http://www.boerse-frankfurt.de
http://www.bourse.lu
http://www.bseindia.com
http://www.bursamalaysia.com
http://www.ca-egypt.com
http://www.chriswrightmedia.com/cerullishariahcapitalprotectionjan09/
http://www.cibeg.com
http://www.cimb-principal.com
http://www.clerical-medical.com

226 Capital Protected Funds Survey

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http://www.dynagest.ch
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http://www.hsbcamanah.com
http://www.igifunds.com.pk
http://www.invesco.com.au
http://www.invest.com.my:8080/personal/funds/screener/
http://www.ise.com.pk/
http://www.jsil.com
http://www.kasb.com
http://www.kuwait.nbk.com
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http://www.lifeisgreat.com.sg
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227Capital Protected Funds Survey

http://www.nikkoam.com.sg
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are_capital_protection_products_LongT8Le6D0NxIItK9DT1N

228 Capital Protected Funds Survey

The Financial Product Development Center (FPDC) was established in Muharram 1432H
(December 2010G). Its main purpose is to enhance the leadership of the Islamic Development
Bank Group in the development and promotion of innovative Islamic financial products within
the framework of the Maqasid al-Shariah. This is accomplished while further strengthening
the financial soundness and relevance of the IDB Group.

The Center is the focal point for the development of new and innovative financial instruments
at IDB Group, and for this purpose it also collaborates with various institutions in the Islamic
financial industry.

Strategic Objectives

The Center has three major strategic objectives:
 Developing Business Process for new product development.
 Building capacity of product developers.
 Designing new financial products.

These three objectives are summarized by the “3Ps” that the Center works along: Process,
People, and Products.

For any queries, please contact:
Financial Product Development Center

Islamic Development Bank
19th Floor, HQ Building

Jeddah, Kingdom of Saudi Arabia

Email: fpdc@isdb.org
Tel: +966 12 646 7469
Fax: +966 12 636 7554

www.isdb.org