The Hindu Business Line : MIP schemes disappoint

RETURNS generated by monthly income plans offered by mutual funds over the past one year have proved to be a major washout with MIPs providing an average score of 4.17 per cent, barely above the rate given by savings bank deposits.

Investors in the MIPs, many of which were launched when such hybrid products were the flavour of the season, have been largely disappointed with the MIPs' performance, a stance that is reflected in some depletion of assets under their management.

MIPs, a number of which are free to invest 10-15 per cent of their assets in equity, have fallen far behind when viewed against hybrid schemes of other hues - especially the ones that have heavier equity components.

For the record, equity-oriented balanced funds have provided an average 13.9 per cent (as on April 19, 2005), while the debt-oriented ones have delivered 5.95 per cent. Pure equity funds have, of course, done far better; this is reflected in the 20-40 per cent returns provided by many of these equity schemes, including sectoral options that are focused on areas such as FMCG, technology and banking.

Fund circles concede that MIPs have not been able to do much in the recent past. As Mr Vinay Kulkarni, fund manager with UTI MF, put it, these funds have experienced bad weather mainly because of their large exposure to debt securities. He, however, emphasises that, "MIPs, which try to use equity to bolster the performance of debt, have a point to make. They have not lost their relevance completely."

This stance is seconded by those in charge of marketing functions. Mr Prabal Nag, who heads JM MF's sales operations, is of the view that MIPs were, not too long ago, feted by a large section of the market.

"Many investors liked it (MIPs as a category of funds), especially the concept of securing monthly incomes," he said, adding that MIPs are often considered important from the point of view of asset allocation.

The relatively poor performers in the MIP category, according to figures collated by Value Research, include Alliance MIP (2.27 per cent), HSBC MIP Regular (2.75 per cent), JM MIP (2.24 per cent), ING Vysya MIP Plan B (2.77 per cent).

Tata MIP Plus, which can park a relatively bigger chunk of its portfolio in equity, has rendered 2.61 per cent.

In other words, an investor who had allocated resources to any of these MIPs a year ago has barely managed to rake in returns that compare favourably with that provided by a savings bank, said a unit holder who has dabbled in MIPs before. Among the better performers are MIPs managed by HDFC MF, Prudential ICICI and Franklin Templeton. FT India MIP, for instance, has given 6.15 per cent in the past year (as on April 19); returns since launch in September 2000 is 12.49 per cent.

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