The process is quite simple. It just involves sending an SMS, and submitting an application form
The fund offers some diversification, not-so-high returns and a high correlation with the direction of the Indian market
Seoul-based Mirae Asset has launched 'Tiger Kospi', its first exchange-traded fund outside South Korea. Tiger Kospi is based on the Kospi 200 and the ETF was listed on the Hong Kong Stock Exchange on Wednesday. It is also the first ETF in Hong Kong to track the Kospi.
Mirae's investment objective for Tiger is to seek to provide investment results which before deduction of fees and expenses, closely correspond to the performance of the Kospi 200 index. The index is based on 200 blue chips and its top five constituents by weightage being Samsung Electronics, Pohang Iron and Steel, Hyundai Motor, Hyundai Heavy Industries and Shinhan Financial Group.
The fund is also being promoted in India. But does it make sense for an Indian individual to invest in the fund? Let's go back to the basics. What does an investor look for when he buys a particular fund? He looks for a higher return, diversification and exposure to an uncorrelated asset class.
For instance, an Indian investor would invest in a foreign fund only if it had a low correlation with the Indian markets. But, while investing in the South Korean market offers a means of diversification, this is marred by the fact that the fund will invest only in stocks of a single country, that is South Korea, and this leads to concentration. A majority of the Fund's assets will be invested in securities that are denominated in Korea Won, which will mean exchange rate risk.
What about returns? Kospi's return for the past nine years has been lower than the Sensex. The compounded annual return of Kospi over the past nine years is about 14% while that of Sensex is almost 18%. Tiger Kospi passes one of the tests; it gives exposure to a new asset class. But is it uncorrelated?
The correlation of Kospi's up and down years to the Sensex is very high. Every year the Kospi was up, the Sensex was up too, and every year the Kospi was down, the Sensex was down as well. Thus what we are getting is some diversification, not-so-high returns, and high correlation with the direction of the Indian market. So why get exposed to it and take additional risk?
Premium allocation and policy administration charges reduce drastically beyond 10 years in comparison to other ULIPs
Canara HSBC Oriental Bank of Commerce Life Insurance Company has launched Future Smart ULIP, offering insurance cover to ensure securing a child's future along with an opportunity to meet future financial needs.
One of the features is 'Milestone Withdrawal' which will give the customer 15% of the fund value in each of the last five years of the policy. The remaining fund value will be given at the time of plan maturity as chosen.
The premium allocation charge and policy administration charge for five years are in line with other ULIP products. The charges for 10 years are slightly more than that for other ULIP products, but the charges for more than 10 years goes down drastically. This is because of the zero premium allocation charge from the 6th year and a low policy administration charge of 0.05% per month for five years, which increases by 20% every five years.
The brochure mentions sample mortality charges which are meaningless as they are the lowest numbers that we have come across and may be misleading. Moreover, child ULIPs are known to have higher mortality charges than regular ULIPs, to provide for benefits like premium waiver in the case of a policyholder's death and so on. Be sure to find out the exact mortality charges before investing in the plan.
The plan allows the policyholder to change the sum assured from the 6th year. There will be no change in the annual premium as a result of any change in the sum assured. It will, however, have an impact on the mortality charge, and result in a change in the amount of funds used for investments.
Speaking at the launch meeting, Mario Perez, director-sales, marketing & products, Canara HSBC Oriental Bank of Commerce Life Insurance Company, said: "At Canara HSBC OBC Life Insurance, we design products that fulfill the long-term needs of our customers. Our 'Future Smart Plan' ensures that the future financial needs of a child are not disturbed, even in the case of an unfortunate event."
"We are offering lower allocation charges if the customer opts for ECS (electronic clearing service) on standing instructions, for the payment of premium, an unbeatable combination of lower costs and increased convenience. 'Milestone Withdrawal' helps the customer to meet the continuing education needs of the child in the context of the ever-rising education fees," Mr Perez said.
Premium allocation charge: This is a percentage of the premium appropriated towards charges from the premium received. If paid through ECS/SI - 8.25% in year 1, 6.30% in years 2 and 3, 5.30% from year 4 to 10, nil from year 11 onwards. By any other mode - in year 1 it is 8.40%, in years 2 and 3 6.40%, from year 4 to 10 it is 5.40%, and nil from year 11 onwards.
Policy administration charge will be 0.05% per month on the annual premium in the first five policy years. Thereafter, it will increase by 20% every five years.
Policy term and annual premium amount: 10, 15, 20 or 25 years; the minimum annual premium in this plan is Rs25,000 ( Rs50,000 for policy term of 10 years) and there is no upper limit.
The minimum life cover that a customer can choose depends on the age and the policy term chosen: For ages below 45 the 10, 15, 20 years term will be 10 x annual premium; for 25 years term the life cover will be 12.5 x annual premium. For ages 45 and above it is 7 x annual premium. There is no maximum limit on life cover in this plan; however, the life cover provided will depend on underwriting.