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Nilanjan Dey

MUTUAL funds aimed at children are in a class of their own, thanks to their USP. There are not too many of these in India as fund houses have been generally averse to launching products specifically for minors.

Perhaps the general idea is that such funds won't sell much and the investing public would be happy to put their hard-earned resources elsewhere. It may, however, be worthwhile to review some of these funds from the point of view of their performance.

Children's plans are today managed by players such as UTI (the UTI Children's Career Plan was probably the first to arrive), Tata, IDBI Principal, Franklin Templeton, Prudential ICICI, HDFC and SBI.

Most of these are balanced schemes, allocating both to equity and debt. The various options available under them are branded differently. Pru ICICI's Child Care Plan, for instance, offers investors separate plans called `Gift' and `Study'.

Returns from these schemes have varied as well. According to an analysis, FT's Children Asset Plan (mooted originally by the erstwhile Kothari Pioneer MF) has provided over 80 per cent since inception in mid-1998. IDBI Principal's Child Benefit Fund has given over 60 per cent since October 1997.

Fund houses, one feels, should make an all-out effort to take care of children's plans. Parents who part with their money, often on recommendations made by distributors, do so with a lot of expectation. Losing out on investments made for the benefit of one's children is always a painful experience.

A few players throw in insurance to attract investors. In some cases, these are accident insurance schemes, subject to a pre-determined ceiling. For HDFC MF's Children's Gift Fund, it is up to 10 times the face value of units or a maximum Rs 3 lakhs.

How do these funds actually invest? SBI MF's Children's Benefit Plan, with its fairly small asset-base of Rs 5.15 crore (as on April 30), is principally invested in Triple-A securities, the average maturity being 3.03 years. Fund manager, Ms Bekxy Kuriakose, has taken exposure to issues made by Citicorp Maruti Finance, Reliance Industries, Power Finance Corporation, ICICI and HDFC. She has also maintained a substantial cash position — 19.9 per cent.

In comparison Tata Young Citizens' Fund has a critical equity component, 47.7 per cent as on April 30. The rest is parked in Triple-A debt and sovereign paper. The equity portion is spread over a wide range of sectors, the three dominant ones being banks, IT consulting & services and heavy electrical equipments.

Children's schemes, it is felt, will find greater acceptance if their managers strive harder to innovate. There is scope for added facilities as well. Fund houses that have insurance companies as associates (and there are quite a few of them today) are particularly well placed to do this.

It may be feasible for more players to run children's funds as, say, debt-oriented schemes that provide regular streams of income to the investors concerned. There could be bulk payments to coincide with a child's board-level examination, which could be declared in advance at the time of investing.

Such innovations can in the long run improve asset sizes, which are not quite impressive at the moment. Given the ever-increasing cost of education at all levels, including that of professional courses, the possibilities seem to be endless.

Feedback may be sent to blcal@vsnl.net

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