Will 7-10% returns materialize?

ING Funds expects the ING Annual Alpha Access Capital Protected Fund - a three-year close-ended capital protected fund - to generate annual returns of 7% to 10%.

Its chief executive officer Steve Ong said the fund ensured investors with 100% capital protection at the date of maturity by investing in ringgit-denominated financial instruments.

These instruments issued by local financial institutions would return 100% of the invested capital back to investors at the end of the three years, he said at the launch.

Under its investing strategy, the fund would invest up to 10% of its net asset value in the ING Outperformance Alpha Option, a three-year ringgit hedged call option, consisting of Global Emerging markets ex-Asia and the Asia Emerging markets indices versus the US S&P 500 index.

"The two global emerging markets basket of indices offers investors diversification as they are not correlated with one another,” he said.

The Global Emerging Markets ex-Asia includes Russian Depository Index, Central and European Europe Index, iShares MSCI Brazil Index Fund and iShares MSCI Mexico Index Fund.

The Asia Emerging Market consists of Hang Seng China Enterprises Index, Kospi 200 Index, MSCI Taiwan Index and ASX 200 Index.

Ong said the fund aimed to provide investors with an annual payout regardless of bull or bear market conditions with the potential outperformance of the two global emerging markets basket of indices versus the US S&P 500.

Based on historical data, these markets have been registering higher returns than the US S&P 500.

"We believe there is still room for more growth in the near future for these markets compared with the more mature US market," he added.

The approved fund size is 500 million units with a minimum initial investment of RM5,000.

ING Funds has targeted to increase the funds under its management to RM3bil from about RM2bil at the end of 2007 with the launch of another three products this year.

Is this too good to be true?