'Gold, realty funds still away'

The mutual fund industry is still not ready for innovative products such as commodity, gold exchange traded, and real estate funds and is yet to sort out various operational issues, U K Sinha, chairman and managing director of UTI Mutual Fund, said today.

In June, the Securities and Exchange Board of India had allowed fund houses to float real estate funds as close-ended schemes, which can invest in real estate properties, shares/bonds of real estate companies, and mortgage-backed securities.

However, the market regulator had said these schemes need to declare net asset values on a daily basis.

Fund managers had voiced their concerns on daily valuation, taking into consideration the illiquid nature of real estate as an asset class compared with other asset classes.

Funds were also concerned over issues such as meeting redemption pressures and custodian aspects.

In case of gold exchange traded funds, fund houses still need to sort out custodian aspects and way of storing the physical gold.

Speaking at the Mutual Fund Convention 2006, Sinha stressed on creating greater investor awareness so as to popularise these innovative schemes.

Also, Sinha emphasised on retirement plans and schemes that will address the needs of children.Sinha also said there is a need for more innovative schemes such as inflation-linked funds and target maturity funds.

Target maturity funds are enhanced version of capital protection funds, which implement proper asset allocation strategies to address various needs of investors including education, retirement, etc.

He further said that financial planning is a major area to be addressed.

The country's largest fund house manages assets worth Rs 41,600 crore.