Fresh Templeton Bid To Woo Investors

It is introducing a 'systematic investment plan' (SIP) to encourage its unitholders to invest specified amounts periodically.

The first offer Templeton introduced was the 'trail fee concept' to prevent early exit of unitholders from the scheme.

In the SIP, rooted on the 'rupee cost averaging' concept, investment will be based on a fixed amount at regular intervals. This would result in the purchase of more units of the fund when the price of the unit is low and lesser number of units when the price is high.

Over a pre-determined period, this would result in the holder procuring units at a cost which would always be lower than the average market price, irrespective of whether it is a rising, falling or a fluctuating market.

 

The unit holder can utilise the offer without tracking the net asset value (NAV) of the fund. Supposing a unit holder wishes to invest Rs 4,000 over four months, each month he has to invest Rs 1,000 in the scheme.

In a fluctuating market, the monthly price of each unit is Rs 12, Rs 15, Rs 9 and Rs 12.

While, the average price per unit per month would work out to Rs 12 (48/4), the average cost to the unit holder would be Rs 11.61 (Rs 4,000/344.44 where 344.44 is the total number of units.

This is calculated by dividing the amount invested each month by the prevailing unit price each month).

In a falling market as well as a rising market, the average cost per unit is lower than the average market price per unit.

The main purpose of the concept is to offer an incentive to the intermediaries in the form of an annual 'trail fee' for helping to retain the unitholders in the scheme.

This incentive, a sort of a retention premium, will be calculated as a percentage of the total amount garnered by each broker.

It would proportionately increase or decrease, depending on the number of unitholders during the year.

Trail fees would be paid as long as the investor stays with the scheme.

The broker can earn an amount every year by maintaining the same tally of investors for the year.

Templeton would rope in eight to ten brokers for marketing the scheme.