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MUF(Money Utilization Factor)
MUF(Money Utilization Factor): This parameter determines how long investor's money was blocked in the market. For Spot investment it is 100% while for APS it could be 0 to 100
Example 1: PNB has Spot return 44% for 5 years (1st April 2008 - 31st March. 2013) while APS investors have gained just 40% during the same period. However, APS blocked the money (MUF) less than 50% of the time. So, rest 50% (2.5 years) money was free to be utilized anywhere. Assuming it was in savings account which accrued 6% interest then it has total interest of 15% in 2.5 years. Hence, we can say APS has net return of 55% (40 + 15) in PNB which is much better than spot return.
Example 2: Bharti Airtel has lost nearly 28% during 5 year period (1st April 2008 - 31st March. 2013). During the same time period APS investors have lost nearly 24%, 4% less than the actual. MUF is 20% for the same. It means money was free nearly 4 years in case of APS investors. So, simple savings account interest calculation shows APS investors would have got 24% interest from savings account during those 4 years. Hence APS investors have net 0% loss for Bharti Airtel while regular investor has 28%.
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