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Friday, Aug 22, 2003

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MFs to devise schemes to lure PF monies

Nilanjan Dey

Kolkata , Aug. 21

THE Labour Ministry's notification regarding the revised investment pattern for PFs is set to transform the way gilt funds are marketed in India. Mutual funds are already using it to re-introduce their schemes to PF managers, with the hope of garnering larger sums from the latter.

Briefly put, the Labour Ministry's move (which complements a similar stance adopted by the Finance Ministry earlier) is in exercise of the powers conferred by the relevant provisions of the Employees' Provident Funds Scheme, 1952. It prompts the Government to direct that all incremental accretions belonging to the Fund will be invested in a certain manner, which fund houses now find encouraging.

The asset management industry is of the opinion that PFs will henceforth take up the issue of investment in gilt funds more seriously. Not too many PFs, especially the smaller ones, have professional money managers working for them, and this is where MFs can make a difference, it is felt. Quite expectedly, marketing functionaries working for fund houses see this as a special opportunity.

Mr Prabal Nag, head of marketing & sales at JM MF, held that the Ministry's latest stand is being seen as a positive development, one that is already showing promise. "We have started telling our PF clients that they are free to invest more in gilt schemes," he said, hoping that this should make a significant difference in collections in the long run.

The gilt scheme managed by JM MF, in fact, has a separate PF plan, carrying growth and dividend options. As on July 31, its top holdings were 11.5 per cent GOI 2011A (33 per cent), 9.81 per cent GOI 2013 (23 per cent) and 9.39 per cent GOI 2011 (20 per cent). This profile, incidentally, has been kept different from the one carried by the regular plan. The maturities of the two plans also differ.

According to Mr Rajan Krishnan, Vice-President, Sales & Marketing, Principal MF, the idea of attracting more PF money has already caught on. "It's not that PFs did not invest actively. Now, however, we expect them to be more dynamic on this front," he said.

It may be mentioned that the notification specifically referred to a 25 per cent exposure to Central Government securities and/or units of MFs that have been set up as "dedicated funds for investment in government securities and which have been approved by SEBI". Additionally, it mentions 15 per cent and 30 per cent exposures to similar areas.

This, feel distributors of investment products, opens up a new avenue for MFs. It is believed that a number of borderline cases (particularly ones in the private sector) will look at gilt funds even more, now that the Government has clarified its position. Many large organisations, nevertheless, are considered more active than the smaller players when it comes to management of their PF monies. So it is the second-rung outfits that are being targeted, sources said.

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