Fund Management

As the name suggests, Fund Management is a simple task of managing the pool of money on behalf of others. The main aim of fund management is to maximise the growth of the money invested. Thus, the name Investment Management.

If you are someone looking to grow your wealth with market-linked returns while also securing your family’s future with life insurance? Then what you’re looking for is a Unit-Linked Insurance Plan (ULIP)! Premiums you pay for a ULIP go towards life cover as well as market-linked funds. With a market-linked plan, you can potentially get exponential returns if the market performs well. However, the market-linked nature of ULIPs also make them a risker option when compared to guaranteed plans. Market rates tend to be volatile and can rise or fall unexpectedly.

This is where the concept of ‘fund management’ comes into play. With a good fund management strategy, investment risks are mitigated and returns are maximized. ULIPs offered by Edelweiss Life Insurance offer various fund management options. Below is a simple guide for those who want to learn more about our fund management system.

What is Fund Management?

Fund management is the process of maximizing your market-linked returns by adapting to market trends. Monitoring your funds and make changes as per the market’s trajectory is the best way to mitigate your risk. Most ULIPs allow you to invest in a range of diverse funds, and you can switch between these fund options to manage your risk.

The three main types of ULIP funds include:

Equity Funds- Directly linked to market performance, which makes them a high-risk, high-reward option.

Debt Funds- Funds that are stable and invested in fixed-income securities such as government bonds. Debt funds are medium to low risk, but the returns are also modest in comparison to equity funds.

Balanced Funds- Funds that are equal part equity and debt. These are stable funds for beginners.

A good fund management strategy maximizes your returns by switching between these fund options at the opportune time. Those who want to maximize profits will focus on equity funds, and they will only switch to balanced or debt funds when the market is severely underperforming. On the other hand, those who want steady income with minimal risk will prefer debt/balanced funds.

Your fund management strategy will depend on various factors, such as your risk tolerance, age, life stage, and future financial goals. The primary goal is to not only maximize your ULIPs returns, but to also reduce risks as per your current financial situation. For example, someone looking for retirement income needs to be more conservative with their funds. But a person who wants to fulfil a major life goal (like buying a house) will need to focus more on profits.

Fund Management Strategies Offered by Edelweiss Life Insurance

Edelweiss Life Insurance ULIPs offer three main fund management strategies:

Self-Managed Strategy- Prefer to handle your finances by yourself? Then choose the Self-Managed Strategy during the inception of your policy. Under this fund management strategy, you will be able to switch between funds as per your personal requirements. Moreover, you have unlimited fund switches at your disposal! This allows you to strategically manage your funds without constraints.

Profit Target Based STP- This systematic transfer plan focuses on maximizing your returns. Your premiums will be invested into high performing equity funds that have the potential to grow exponentially. This strategy is ideal for those with high risk tolerance, as equity funds may also drop in value due to market fluctuations. Your funds will be managed by Edelweiss Life Insurance’s professional investment consultants.

Life Stage & Duration Based STP- If your primary goal is to grow your savings at a steady pace, then choose the Life Stage & Duration Based STP. This systematic transfer plan diversifies your premium instalments among equity and debt funds. Your potential returns may be lower when compared to the Profit Target STP, but you also take on less risk. This STP is ideal for those who are risk averse or looking for steady income post-retirement.

Which Fund Management Strategy Should You Choose?

First off, if you are confident in your own investment strategy, then self-management is the right choice for you. Self-management allows you to modify your funds as per your convenience and risk tolerance. On the other hand, systematic transfer plans are better for those who want to grow their wealth stress free. With an STP, you need not worry about fund transfers, market research, and management strategies. All of this will be handled by the insurance company itself.

Profit target based STP will be your primary choice if you goal is to grow your wealth as much as possible. Of course, this STP comes with higher risk, and hence is not suitable for those who are risk-averse or for people who have other financial responsibilities. If you are risk-averse, simply go for the Life Stage & Duration Based STP. This STP ensures decent returns while also mitigating the risk associated with market-linked investments.

Conclusion

A good fund management strategy is a must for successful unit-linked investments! With Edelweiss Life Insurance, you have the option to manage your funds yourself or choose one of our systematic transfer plans. If you’re looking for a plan that offers life cover and market-linked returns, consider Investment Plans

 

Aastha Mestry - Portfolio Manager 

An Author and a Full-Time Portfolio Manager, Aastha has 6 years of experience working in the Insurance Industry with businesses globally. With a profound interest in traveling, Aastha also loves to blog in her free time.