The Hindu Business Line : MFs' new equity schemes disappoint investors

INVESTORS in IPOs of equity funds are generally coming in for a rude awakening — many of the schemes, including some of the new-fangled ones, have not made money for them at all. In some cases, the net asset values are way below their expectation.

Despite the collections recorded by the IPOs, the poster boys of the asset management industry have rarely had a season worse than this. A look at the latest NAV tables indicate that many of the freshly-introduced funds are either quoting below the offer price of Rs 10 or have breached it only after toiling hard.

While the likes of ABN Amro Opportunities, Chola Mid Cap and Reliance Equity Opportunities are part of the second group, funds such as Franklin India Flexi Cap and Principal Focussed Advantage are still below par. As on May 16, the two had NAVs of Rs 9.94 and Rs 9.67, respectively.

The funds in the ABN Amro, Chola and Reliance families had NAVs of Rs 10.02, Rs 10.67 and Rs 10.05, respectively on that date.

The adverse reaction of investors to the situation becomes rather sharp when they are reminded of the large IPO mobilisation figures.

In recent times, many of these funds created a stir with tremendously successful initial offers. Franklin India Flexi Cap, HDFC Premier Multi Cap and Reliance Equity Opportunities were in fact among the star attractions.

The last two have seen their NAVs at marginally over Rs 10, while the first is hovering below par. On May 16, the Reliance MF and HDFC MF schemes had NAVs of Rs 10.05 and Rs 10.25, respectively. Franklin India Flexi Cap on the other hand had an NAV of Rs 9.94 on that day while Canemerging Equities had a NAV of Rs 9.62.

Mutual fund circles, when confronted, vigorously defend their position, even as they refer to the general state of the markets and, more specifically, to the challenges that lie before stock pickers.

"You need to give fund managers some time before criticising them for non-performance", said Mr Suhas Naik, Director, Equity Markets, ING Vysya MF, adding that equity products remain ideal choices for patient investors. "Unit holders should not be in tearing hurry to get out", he noted.

Others, like Mr Shyam Bhat, fund manager with Principal MF, concur. "There used to be a time when the market was more tolerant. That is changing quickly. Many investors now want to make big money right after allocations have been made," he observed.

A section of the intermediaries, given the circumstances, grudgingly agree that many of the existing products are probably a better proposition for their clients.

"It is always better to invest in a fund with a successful track record of not only quantitative performance but also of maintaining the fund management philosophy to achieve the objective it originally set out for," SKP Securities, a city-based distributor has told its clients.

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