Aditya Birla Sun Life MF launches turbo STP. An explainer on how it works

Aditya Birla Sun Life (ABSL) Mutual Fund has recently launched a turbo systematic transfer plan (STP). In this, the unitholders can opt to transfer variable amounts from a source scheme to a target scheme at regular intervals.

In a regular STP, you transfer some of the funds from one scheme to another scheme. One of the easiest and convenient ways to do is via systematic transfer plan, or STP.

Mutual funds enable investors to change their allocation to an asset class by transferring investment from one scheme to another.

Although one might wonder what exactly are “turbo” STPs. In this, the amount of transfer to the target scheme will be determined based on the results from an in-house model that helps ascertain market valuation.

The underlying idea behind turbo SIPs is to invest more at attractive market valuation levels and less when valuations are expensive.

What is the turbo model?

The model tracks technical and fundamental parameters such as valuation ratios, trend ratios and volatility ratios, to arrive at an equity valuation multiplier (EVM). This value helps determine the actual amount to be transferred based on the pre-selected STP base amount.

Turbo STP enables unitholders to transfer variable amounts from a source scheme to a target scheme at defined intervals. It also helps invest more when market valuation is attractive and less when market valuation turns expensive to optimize the investment growth potential.

This is a facility for those investors who have a lump sum amount to invest and are unsure about market valuations and the amount they should contribute and for what tenure.

Illustration: If the base instalment amount is Rs 10,000 and based on the latest EVM, the matrix defines transfer of 0.2 times of base instalment amount then Rs 2,000 will be transferred from the source to the target scheme.

Similarly, if based on the equity valuation multiplier, the matrix defines the transfer of 3 times of base instalment amount then Rs 30,000 will be transferred from the source to the target schemes.