Investors still on the Sidelines for New Mutual Funds

By Vipin Agnihotri

If the recent trends are anything to go by, the Indian mutual fund (MF) investor seems to have grown wiser. In my opinion, investors are not taking the new fund offer (NFO) bait that easily.

It has come into the notice of The India Street that of the top 25 diversified equity schemes — in terms of assets under management (AUM), as on July 31, 2007 — only two schemes launched NFOs this calendar year.

The two schemes that lunched NFOs this calendar year are the Fidelity International Opportunities Fund and the SBI Infrastructure Fund Series I. Statistic wise; the Fidelity International Opportunities Fund has an AUM of Rs 1,645.58 crore. On the other hand, the SBI Infrastructure Fund Series I have an AUM of Rs 2,594.77 crore.

When one compare this with the same period last year, one would get to know that of the 25 biggies, seven schemes had their NFOs in calendar 2006. Clearly, one can say that the craze for NFOs is on the wane.

If experts are to be believed, in this year’s list of top 25, 13 existing schemes have grown their AUMs. It is worthwhile pointing that they have done so not just by the mark-to-market gains of the stocks in their portfolios, but through fresh inflows as well.

Point to be noted here is that the AUM of a scheme can vary on two factors. First and foremost, through the gains or losses of the stocks the scheme invests in, and secondly net inflows/outflows into the scheme.

For example, take the case of SBI Magnum Global Fund 94. Since July 2006, it has grown its AUM 175%. Taking into consideration the fact that the Sensex has returned 44.74% in the period, a majority of the AUM growth would have come through fresh inflows.

It is pretty much the case with ICICI Prudential Dynamic Plan as well. Theoretically speaking, its AUM has grown 139% since July last year. The India Street have a talk with various mutual funds experts in this issue and most of them were of the opinion that discerning customers have started pouring money into good schemes, and all this is coming in the form of systematic investment plans (SIPs). According to sources, Rs 300-400 crore is coming in every month through SIPs.

Other schemes that have made an impact on the investor mind are Sundaram BNP Paribas Select Midcap, DSP Merill Lynch India TIGER, Reliance Vision, Reliance Growth, Tata Infrastructure Fund and HDFC Top 200.

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