Deutsche Asset Management has just launched its Capital Protection Fund. The three-year closed-ended capital protected fund closes for subscription on May 2. Suresh Soni, who is the fund manager at DWS, says the fund essentially puts its money in fixed income as well as equity markets. It allows investors to participate in equity markets in a rather risk free manner. (View - New Fund Offers open NOW)

He claims the fund invests money in such a manner that investors are assured of their capital at the end of the fund period. The fund's initial allocation tends to be something like 75-80% in fixed income that will grow to Rs 100 at the end of the three-year period, which returns capital back, while the balance money is invested in equities.

Excerpts from CNBC-TV18’s exclusive interview with Suresh Soni:

Q: Could you walk us through the fine points of this fund, how much are you looking to raise, what sort or returns are you expecting and what is the duration that would be locked in for this fund?

A: This is a three-year closed-ended capital protected fund. We have launched it about a week back and it closes for subscription on May 2. The fund essentially puts its money into fixed income as well as equity markets. It allows investors to participate in equity markets in a rather risk free manner. Over the last few months we have seen increased volatility in the equity markets. This fund invests its money in such a manner that investors are assured of their capital at the end of the fund period. The initial allocation tends to be about 75-80% in fixed income that will grow to Rs 100 at the end of three years, which returns your capital back, while the balance money is invested into equities.

Q: Would this strategy mean that overall returns would be kind of capped because you are trying to protect capital?

A: Overall returns won't be very high as compared to what the market could deliver but at the same time you are protecting the downside also.

Q: What are you specifically looking at on the equity side? What is looking good at this point of time? We are within 6% of an all-time high and you are going to be entering the market very close to that. What is looking good on the equity side?

A: We are overweight right now in the capital goods and telecom sector. In our portfolios these two sectors have still a clear visibility of earnings. We will possibly like that but at the same time it will be a diversified portfolio. The benchmark for the fund on the equity side is the BSE 500.

Q: Going forward what would be the other sectors in which you see safe bets?

A: IT is now showing a good trend. It’s only that you are waiting for rupee to stabilize at a certain level and then you could possibly look at IT in a much more positive manner.

Q: Where do you see the market going from here?

A: The markets are looking good. It’s just that near-term because of higher interest rates as well as a likely slowdown in earnings growth, which we are witnessing in FY08, the markets may not perform anywhere close to what we have seen earlier. In that sense, returns in the near-term could be capped but at the same time on a three-year horizon you could look at decent returns from the market.

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