ICICI Prudential Capital Protection Oriented Fund II Series VII 24 Months Plan is a close ended fixed income fund with a partial equity orientation. This fund is the latest in a series of similar funds, around 45 so far in the last few years, that have the attractive term `capital protection' in their names. The minimum application amount per investor is Rs 5,000.

FOR WHOM: For all investors who are interested in locking in their investment for two years, mostly in fixed income, and a little bit in equities, but unable to find matching debt and equity investment options.

CLOSE-ENDED FUND: A few days after the NFO (new fund offer) closes on February 27, the allotment will take place. You can not invest in this fund with the asset management company directly after February 27.

Nor can you redeem it directly up to 740 days from the date of allotment. The maturity date will fall roughly around the start of March 2014; although, the alloted units will be listed on the BSE, technically, you could buy or sell it.

ASSET ALLOCATION: The scheme information document (SID) states per that it will invest 88-100 cent in debt securities and 0-12 per cent in equities and equity-related securities. MATURITY: The investment in debt securities will have close to two-year maturity, and will exclude debt securities with a floating interest rate component.

UNTOUCHABLE INVESTMENTS: The fund commits to stay away from securitised debt and real estate debt securities.

CHARGES: Annual recurring charges will be up to the highest allowed by Securities and Exchange Board of India for such funds, that is, 2.25 per cent. No NFO expenses will be charged.

Like every other fund having `capital protection' in their names, this fund too does not guarantee capital protection. This has been stated in the fund's SID. The investment objective is only oriented towards protecting your principal investment through a minimum 88 per cent debt exposure and maximum 12 per cent equity exposure. Assuming a worst-case scenario of equities giving zero return, then a 88-12 debt-equity fund will have to be invested in debt yielding about 13.60 per cent returns, which considering the fact that the fund aims to invest in AAA-rated debt, is an unlikely outcome. The figures work out to be far worse if the equity investments post negative returns. Thus, with the leeway available to the fund manager, the use of the word `capital protection' is misleading. Theoretically, you could still, and easily, lose a part of your principal investment in such a fund.

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