A Do-It-Yourself Capital Protected Fund? Here’s the solution.

Ádám Halóka
Product manager

The major stock exchanges have just put a tempestuous month behind them. The American S&P500 los t0.32%, and the BUX index 10.86% of its value. The share markets have fallen by a total of 2.42%. And investors in Hungarian bonds had no cause for celebration either, having suffered a 5.05% loss as a consequence of the yield hikes.

Due to the increasingly common losses of confidence in the equity markets, and the changes to domestic legislation, a substantial proportion of savers are showing a serious interest in capital and yield protected collective investment products. Recognising this demand, a few of the major Fund Managers launch several investment funds of this type in the Hungarian market every year. It’s worth bearing in mind that these are usually closed-end funds, which means that the redemption opportunities are limited, and the full initial investment is only recouped at maturity. A characteristic of these products is that due to their structure, which is geared to protecting the invested capital, their profit potential is limited.

If demand arises for a capital protected product, product development has the task of identifying the current investment story and articulating the investment policy. The aim is for the portfolio manager to use the capital accumulated during the subscription period to develop a bond portfolio with a duration matching the term of the fund, in order to ensure the capital protection, and then to invest the money left over after this into profit-generating securities that fit in with the fund’s profile.


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