Many schemes launched in earlier bull market still trading below face value.
Timing the market can be risky. Try telling that to mutual fund (MF) houses. A number of schemes launched during the last months of the 2007-2008 bull run are trading well below their face values today.
Launched between November 2007 and January 2008, these were mostly sector-specific and equity-diversified schemes. Though the Sensex is back at 20,000, many of these schemes are well below their face values. Take, for instance, JM Agri and Infra Fund, launched in November 2007. The scheme collected Rs 680 crore. The assets have slipped to Rs 130.45 crore. Today, its net asset value (NAV) is a dismal Rs 3.08.
A number of others, such as JM Core 11 Series 1, L&T Small-cap and LIC Top 100, are also trading below their face values. MFs had launched 26 new fund offers (NFOs) in the equity segment during those three months. However, the NAVs of half these schemes are below the face value of Rs 10 per unit. And, no scheme has an NAV of more than Rs 20.
| MISSING THE RALLY | |||
| Scheme | NFO mobilisation (Rs cr) | Current assets (Rs cr) | NAV (Rs/unit)* |
| HSBC Emerging Markets | 106.00 | 66.69 | 9.56 |
| ING Global Real Estate Retail | 218.00 | 95.30 | 9.68 |
| JM Agri & Infra | 680.00 | 130.45 | 3.08 |
| JM Core 11 Series 1 | 680.00 | 208.68 | 4.84 |
| JM Tax Gain | 55.17 | 60.09 | 8.09 |
| JP Morgan India Smaller Companies | 509.45 | 242.67 | 8.47 |
| Kotak Indo World Infrastructure | 815.97 | 493.67 | 8.09 |
| L&T Small Cap | 20.22 | 21.89 | 6.16 |
| LIC MF Top 100 | 585.61 | 348.85 | 8.98 |
| Sundaram BNP Paribas Energy Opp | 2431.96 | 1634.00 | 9.06 |
| UTI Infrastructure Advantage | 3500.00 | 2381.89 | 9.87 |
| *As on September 27 Source: Value Research | |||
Said an industry expert, “Many fund houses invested in much-hyped sectors and launched new offers in anticipation of a further rally. However, these sectors did not perform as expected, causing the schemes to suffer.”
Given the huge rush at the time to participate in the equity market, these NFOs garnered a significant amount of money – Rs 21,205.40 crore. Reliance Natural Resource Retail mopped up Rs 5,660 crore, UTI Infrastructure Advantage Rs 3,500 crore and HDFC Infrastructure Rs 1,720 crore. However, the combined assets under management of these schemes had dipped 32 per cent to Rs 14,456.5 crore as on September 27. Industry experts said it could be because of redemption by investors and due to the inability of the stocks held to reach their previous highs.
Blues still
Many fund houses seem to have learnt a lesson and are reluctant to launch new schemes. “I will prefer to focus on improving the performance of my existing schemes,” said a chief executive officer of one of the top five fund houses.
From the statistics available with the Association of Mutual Funds in India, between this April and August, the industry witnessed the launch of only 10 equity NFOs. The collections were also not impressive at less than Rs 2,000 crore.
The reluctance of the houses is also due to the fact that distributors are no longer pushing their products. Also, stricter guidelines introduced by the Securities and Exchange Board of India have tied their hands.
“To garner Rs 700-800 crore assets in a single scheme involves an expense of Rs 20-25 crore on promotional activities. If the fund house cannot recover this cost in two to three years, it will rather not launch a scheme,” said an independent expert.
