The Hindu Business Line : Mutual fund IPOs get good responses

IPO collection numbers are not the last word in the realm of mutual funds, but newcomer ABN Amro MF's mobilisation of over Rs 2,000 crore does tell a tale. How the MF garnered it all - the liquid scheme alone has managed to pull in more than Rs 1,000 crore - may be another story, but the bank-sponsored fund's success underlines the kind of money that seems to be available in the system.

We are specifically talking about the money that investors are ready to put into mutual funds these days, whether they have a long-term view or not.

Contrast this with the days of yore, when even a Rs 100-crore generation by an IPO was treated as big news! Trace your steps further back to history and you just might remember Kothari Pioneer Infotech Fund, the country's first sectoral scheme dedicated to information technology. Launched in August 1998, it collected merely Rs 8 crore. And Kothari Pioneer actually issued a press statement when the scheme's assets reached Rs 30 crore in early 1999.

That was then. You will, no doubt, argue that Kothari Pioneer's early efforts can never be compared with the massive initiatives undertaken by ABN Amro. True, the two instances cannot be even remotely similar. However, what they do indicate are the changes that have happened in the world of asset management. Aggressive marketing strategies followed by fund houses and increase in investor awareness have caused such a change to take place.

Distributors, one is compelled to believe, are working out a perfect system that ensures that IPO collections are decent enough. Bank-sponsored funds have an added advantage as they can tap existing banking relationships.

A discerning investor, however, needs to go beyond the initial figures and see how much is being retained afterwards. Have most investors stayed back? Have they moved out in bulk? Has the fund concerned managed to shore up its assets on the basis of its performance? Answers to these questions will provide important clues.

Talking of IPOs, the market seems to be full of them at the moment and more are expected to troop in soon. Floating rate products on the debt side, and mid-cap and dividend yield themes on the equity side, are coming up quickly. In fact, more product innovation is expected to happen on the equity front. Floating rate schemes, of course, are a slightly older story, thanks to the good number of floaters that have already entered the market. The medium- and long-term performance of these schemes will be watched keenly by the investor fraternity.

Investors are currently tracking funds that focus on mid-cap stocks. Already a handful of schemes are specifically focused on such stocks and the fund managers concerned say they are bullish on their prospects. Sundaram MidCap, for instance, has indicated that its views are derived from the kind of restructuring that has been done by companies over the past five years or so and expectations on GDP growth rates. However, the MF also warns that "in the immediate future, a minor correction could help cool off this segment".

Feedback may be sent to nilanjan@thehindu.co.in

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