Mutual Fund-Capital Protection

  • What is Capital Protection Oriented Scheme Ratings
  • Methodology
  • Process

CARE’s capital protection oriented scheme ratings are opinions on the degree of certainty with which the portfolio structure ensures timely payment of at least the face value of the units to unit holders on maturity of the scheme. CARE’s capital protection oriented scheme (CPS) ratings assess the degree of certainty with which the portfolio structure is sufficient to achieve the objective of capital protection on maturity of the scheme. Capital protection here means that the NAV should be at equal to or greater than the face value of the scheme on maturity.

CARE’s methodology for assessing the strength of the portfolio structure, in terms of how well it provides capital protection, involves a comprehensive analysis of the investment strategy adopted by the asset management company (AMC), the prevailing market conditions (with respect to the various instruments that the scheme invests in) and the AMC’s track record & past performance. CARE’s CPS ratings are based upon fulfillment of certain minimum conditions by the AMC under which the scheme will operate. The AMC needs to ensure that these minimum conditions are met at all times during the life of the scheme, as a violation of any of these conditions may adversely affect the structure of the scheme and the rating. Suitable warranties from the AMC are taken while awarding the rating. SEBI has stipulated a quarterly review of the rating of a CPS, although the review may be undertaken at more frequent intervals.

The rating process takes about two to three weeks, depending on the complexity of the assignment and the flow of information from the client. Ratings are assigned by the Rating Committee.

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