ING Optimix Financial Planning Fund

ING Optimix Financial Planning Fund is a Fund of Funds scheme designed to provide investors the benefit of financial planning by taking exposure in various asset class based on their risk appetite.

Summary

Type	Open-ended Fund of Funds Scheme	Min. Investment	5,000
Add. Investment	1000	Face Value	10 per unit
Issue Opens	April 19, 2011	Issue Closes	May 03, 2011
Entry Load	Nil	Exit load :	Refer to table below

Benchmark Index : Cautious Plan: 70% CRISIL Liquid Fund Index, 30% CRISIL Bond Fund Index Conservative Plan: 20% S&P CNX Nifty Index, 44% CRISIL Liquid Fund Index, 24% CRISIL Bond Fund Index, 12% INR price of Gold Prudent Plan: 40% S&P CNX Nifty Index, 30% CRISIL Liquid Fund Index, 20% CRISIL Bond Fund Index, 10% INR price of Gold Aggressive Plan: 70% S&P CNX Nifty Index, 15% CRISIL Liquid Fund Index, 10% CRISIL Bond Fund Index, 5% INR price of Gold

For Redemption Load Chargeable* Plan Exit Load Structure (as % of Applicable NAV) Cautious Plan Within 6 months 0.50% After 6 months Nil Conservative Plan Within 1 year 1% After 1 year Nil Prudent Plan Within 1 year 3% Within 2 years 2% Within 3 years 1% After 3 years Nil Aggressive Plan Within 1 year 3% Within 2 years 2% Within 3 years 1% After 3 years Nil

Investment Objective*

The Scheme aims to generate returns by investing in mutual fund schemes selected in accordance with the ING OptiMix Multi Manager Investment process, as per the risk return profile of investors. Each of the 4 plans under the Scheme has a strategic asset allocation which is based on satisfying the needs to a specific risk-return profile of investors.

 

There can be no assurance that the investment objective of the Scheme will be realized.

 

*Source: Scheme Information Document

Is this fund for you?

A "fund of funds" (FoF) is an investment strategy of holding a single portfolio of mutual funds rather than investing directly in various mutual funds. The main underlying investment of these funds is mutual funds (equity or debt as mandated) of the same or the other mutual fund houses.

 

FoFs offer comfort to investors by making them invest in a single product portfolio which provides them diversification, while removes the hassle of maintaining and tracking multiple investments. FoFs as a product is advisable for retail investors as it provides them an opportunity to build a portfolio of well researched and quality funds by spreading their investments across mutual funds. As the FoFs fund manager take care of the research and process required to select the right fund in the portfolio, it removes the hassle of continuous monitoring the performance of each scheme in the investors portfolio.

 

However, investing in FoF attracts higher net expenses as compared to those on regular funds because the fees is paid on both the FoF level and on the underlying investment fund, which is adjusted in net returns.

 

ING Optimix Financial Planning Fund (IOFPF) is a Fund of Funds scheme which will invest in mutual fund schemes of different fund houses. The fund offers four distinct plans under it viz. Cautious Plan, Conservative Plan, Prudent Plan and Aggressive Plan, where one can invest in, and each of them are intended to achieve their different investment objective. Investors can opt for any of the plans for their investments, depending upon their financial needs - being short term or long term financial needs.

 

IOFPF is based on a financial planning concept which aims to generate returns by investing in mutual fund schemes selected in accordance with the ING OptiMix Multi Manager Investment process, as per the risk return profile of investors. The scheme has 4 plans with separate portfolios. Each of the 4 plans under the scheme has a strategic asset allocation which is based on satisfying the needs to a specific risk-return profile of the investors. The scheme offers a portfolio of funds from different asset classes so as to optimize risk return ratio. This is a first kind of offering from ING AMC which is based on a financial planning concept and will have allocation to equity funds, debt funds, liquid funds and Gold ETFs.

 

Portfolio Strategy

While investing in mutual fund schemes of different AMCs, IOFPF will endeavour to diversify its portfolio in order to provide consistent returns to its investors. IOFPF will primarily focus on diversification and will select scheme as per its investment process with the main aim of:

 

• Identifying high quality mutual fund schemes
• Developing a deep understanding of the investment objective and style of the underlying mutual fund schemes, the investment processes of the relevant fund house
• Developing a portfolio of mutual fund schemes with complementary investment styles
• Ensuring that there is a pipeline of back up mutual fund schemes

 

IOFPF will primarily focus on diversification and reduction of overall portfolio risk by combining different mutual fund schemes. The schemes will be selected with complementary investment styles in order to generate consistent returns over a long period of time.

 

Complementary investment strategies tend to have negative correlation amongst themselves (which means if one scheme in the portfolio would be generating negative returns at the same time the other scheme in the portfolio may be generating positive returns depending upon their investment style and universe of stocks); hence averaging out the short term negative returns generated by some schemes in the portfolio, but generating more consistent returns for its investors in the long term.

 

The investment strategy of each fund in IOFPF is as follows:

 

Instruments	Indicative Allocation Range				Risk Profile
	(% to Total Assets)
	Cautious Plan	Conservative Plan	Prudent Plan	Aggressive Plan	High/Medium/Low
Equity Funds	-	15 - 28	34 - 49	63 - 77	High
Liquid Fund, Money Market Funds	63 - 77	40 - 53	25.50 - 40.50	13.50 - 23.75	Low
Debt Funds other than Liquid Funds, Money Market Funds	23 - 37	22 - 35	17 - 32	9 - 19.25	Low to Medium
Gold Exchange Traded Funds	-	10 - 23	8.50 - 23.50	4.25 - 14.50	Medium to High
Money Market Securities	0 - 14	0 - 13	0 - 15	0 - 10.25	Low

* The plans under the Scheme will invest in third party mutual funds and not make any investments in Schemes of ING Mutual Fund.
(Source: Scheme Information Document)

Benchmark

A custom benchmark which is a blend of the following:

 

Type of Plan	Benchmark Index
	S&P CNX Nifty Index	Crisil Liquid Fund Index	Crisil Bond Fund Index	INR Price of Gold
Cautious Plan	-	70%	30%	-
Conservative Plan	20%	44%	24%	12%
Prudent Plan	40%	30%	20%	10%
Aggressive Plan	70%	15%	10%	5%

 

Fund Manager Profile

Mr. Arvind Bansal, Vice President & Head - Multi-manager Investments, has done his PGDM from Indian School of Business and holds a Bachelor’s degree in Chemical Engineering. He has over 10 years of experience in investments & corporate finance. Prior to joining ING Investment Management (India) Private Limited (in November 2007), he was associated with OptiMix Technologies Private Ltd. as Product Manager, ICICI Prudential Asset Management Company Ltd. as Senior Manager, e2e Technologies Ltd. as Co-founder and KPMG as a consultant.

 

Fund Outlook

IOFPF - Cautious Plan: As this fund focus its investments in liquid fund, debt funds and money market securities it would be helpful in catering to mere liquidity needs. It is positioned as a pure debt fund and the fortune of the same would depend upon how well the fund management team play with the interest rates cycles.

 

IOFPF - Conservative Plan: As seen in the table above (under portfolio strategy) IOFPF in the “Conservative Plan” follows a multiple (equity, debt & gold ETF) asset allocation, thus positioning itself similar to a multi-asset hybrid fund. The fund is overweight on debt and liquid instruments thus the fortune of the fund would be closely linked with the debt markets, followed by the equity markets. Also, exposure towards gold (through Gold ETFs) would help to hedge risk thus if managed well, the fund will provide decent returns for its investors in the long run.

 

IOFPF - Prudent Plan: Under the “Prudent Plan”, since a multiple asset allocation model of investing is followed, it would provide its investors with better diversification benefits. The higher equity component as compared to that in “Conservative Plan” would enable in fuelling the returns (if the fund picking is done prudently), whereas the debt investments would provide safety and stability of regular income from coupon payments. Also, investment in gold (through Gold ETFs) would help to hedge risk thus enhancing the fund’s overall performance.

 

IOFPF - Aggressive Plan: Under the “Aggressive Plan”, since investments are more skewed towards equity component, it would perform more like an equity oriented hybrid fund. The higher equity component would enable in fuelling the returns, whereas the portion of assets invested in debt and liquid instruments would provide safety and stability of regular income from coupon payments. Also, investment in gold (through Gold ETFs) would help to hedge risk thus this plan might show high volatility in the near term while limit the downside risk.

 

It is noteworthy that in times of market uncertainty, equities can get highly volatile which may negatively affect the overall equity heavy portfolio returns. But on the other hand, investment in gold (through Gold ETFs) would help to hedge risk thus enhancing the overall fund’s performance. And a noteworthy point is that, since gold has a low or negative correlation with most other asset classes, the fund manager would have some flexibility to tilt the allocation made between each asset classes so that each plan of the fund is well positioned to take full advantage of prevailing market conditions.

 

The funds overall performance will depend on the performance of each asset class in each plan and the fund managers expertise in choosing the most consistent fund in each asset category.

 

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