Know more about Capital Protection Funds
1) Capital Protection Funds (CPFs) are mutual fund schemes that are structured to protect the original investment at the scheme's maturity.
2) The protection comes not from a guarantee or assurance from a third party, but from the way the portfolio is structured.
3) CPFs invest a portion in debt securities which matures to the principal value of the fund. The balance is invested in equity markets.
4) CPFs may use mechanical allocation strategies to allocate between debt and equity to provide capital protection.
5) CPFs are closed-end funds. SEBI regulations do not permit the repurchase of units by the mutual fund till maturity.
6) CPFs protect only the original invested capital in nominal terms, and tend to earn a nominal return similar to a debt instrument.
Source: Economic Times
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