The Aditya Birla Sun Life Asset Management Company has rolled out the Aditya Birla Sun Life Turbo Systematic Transfer Plan, or Turbo STP, allowing its existing mutual fund investors to transfer a variable amount to a targeted scheme at defined intervals.
Explaining the scheme, the fund house on Tuesday said the variable or the actual transfer amount to the targeted scheme would be based on its in-house research or model.
It said the in-house model would track technical and fundamental parameters like valuation, trend, and volatility ratios to arrive at an equity valuation multiplier (EVM) to help ascertain market valuations.
The EVM value, it added, will help determine the actual transfer amount based on the pre-selected STP base amount. The fund said that STP works best with the market valuation model.
A. Balasubramanian, MD and CEO, Aditya Birla Sun Life AMC Limited, explained that in case of the "The Turbo STP transfer from source scheme to target scheme happens based on the equity valuation multiplier (EVM) score (based on valuation ratios (PE, PB, Yield Gap), trend ratios (linear momentum, momentum reversal, copper to gold ratio), volatility ratios) and the corresponding multiplier. In Turbo STP the transfer amount is linked with broader market valuation parameter. The value is not dependent on NAV or previous/ first instalment amount."
"Turbo STP is a facility for those market participants having a lumpsum amount to invest and are confronted with issues regarding market valuations.It will help invest more at attractive market valuation levels and less when valuations are expensive," Balasubramanian further added.
However, different fund houses name this scheme differently. For instance, ICICI Prudential AMC’s “Booster STP,” launched in August 2021, has similar features. It is named a booster STP because the EVM value determines the investment amount in the target scheme.
Besides these STPs, there are other similar STP schemes:
Fixed STP: It is one of the oldest and most popular STPs. In a fixed STP plan, you must set a predefined amount or “unit quantity figure,” based on which the money would be transferred from the source fund to the destination fund, regardless of the market valuation at the time of transfer.
Flexible STP: As the name suggests, these STPs offer a flexible choice of systematically transferring funds from the source scheme to the destination scheme. Balasubramanian explained that incase of "Flexi/ Value STP the amount to be transferred is arrived at based on the difference between the investment value [(first instalment amount) X (number of instalments; including the current instalment)] and the actual market value of the holdings in the target scheme on the date of transfer."
"The first Flexi/Value STP instalment will be processed for the first instalment amount specified by the unitholder at the time of enrolment. From the second installment Flexi/ Value STP instalment onwards, the transfer amount may be higher or lower than the first instalment amount, as derived by the formula stated below: [(first instalment amount) X (number of instalments including the current instalment)] - (market value of the investments through Value STP in the transferee scheme on the date of transfer)," Balasubramanian further added.
Capital Appreciation STP: In this type of STP, gains from the target scheme are transferred to the destination scheme. This STP works for investors who do not want to risk their principal amount and want higher growth. In this option, investors park their money in a debt scheme and transfer the appreciation amount to equity schemes.
For instance, If an investment of Rs. 5,00,000 in a liquid fund delivers a 4-per cent return annually, the capital appreciation would be Rs. 20,000. You can also opt for a monthly capital appreciation STP of around Rs. 1,666 (Rs. 20,000 divided equally for 12 months). This way, your principal amount is safe, while the appreciation amount will get a boost from equity growth.
