The IRDA’s pet project which was on investor protection is once again on top agenda. This time the main topic of discussion is the high guaranteed net asset value products. Hari Narayan the Insurance regulator feels that the investors are misled and he does not want this to happen. His grouse is on NAV guaranteed schemes. The IRDA feels that the products which have a 10 year lock in period and are assuring the investors a redemption of at the highest NAV over first seven years is not actually in the best interest of the investors. The IRDA feels that the products are actually open to mis-selling since the NAV should always correspond to the market highs. These funds also have high exposure to the equity markets as they can give good return during a bull rally but at the same time they switch to the debt situation when the markets slide.
These debt instruments carry low net asset value and the customer is not served well by this. The IRDA feels its best to ban it altogether. The experts feel that these funds can serve well to the consumers and provide good returns. They fulfil the needs o the investors and can give returns of around 5-15% which varies from company to company. This apparently means totally banning this is not a good idea. The IRDA is still very concerned about the situation and still not made up its mind about the final solution for this.
Bell The Bull says: The NAV guaranteed schemes can be good for the investors if proper steps are taken by the regulating authority