The Hindu Business Line : Corporates lured by MFs

THE latest annual reports of many companies are out and a quick look at a cross-section of these statutory statements reveals once again how the corporate sector has been using mutual funds to their advantage.

Treasury managers all over the country are indeed leveraging funds to bring home the best-possible returns and generally tone up their allocations.

The trend encompasses a fairly wide range, from well-know blue chip corporates to small-time outfits that a few would care about in the normal course of business.

The way MFs are being utilised these days by companies makes interesting reading. Take the case of Hindustan Lever. The company, typically associated with the shampoos and soaps it markets, has been a fairly active investor in MFs, as a look at its balance sheet suggests so clearly.

If you are a casual observer, the sheer range of Lever's exposure to MFs may actually come to you as a surprise. For the record, the company has invested in a whole lot of short-term schemes, almost all of them earmarked for institutional investors of its ilk.

These include schemes managed by StanChart MF, HDFC MF, Franklin Templeton MF and HSBC MF. There are quite a few others.

Insist on reading about the funds that Lever has actually parked its money in? We will not give you the whole list but here is a sample all the same: Pru ICICI Institutional Short Term Plan (Dividend Reinvestment - Fortnightly), HDFC Liquid Fund - Premium Plus Plan (Dividend Reinvestment), HSBC Cash Fund - Institutional Plus (Monthly Dividend), Principal Cash Management Fund Liquid Option - Institutional Plan (Dividend Reinvestment - Weekly)... the list goes on.

The point is, this is just an example. You will agree that the Lever story is just the tip of the iceberg. But are corporates willing to actively consider schemes that are not so short-term in nature? That is not quite easy to answer but MF circles seem to suggest that a number of companies have started looking at alternatives, including equity-laced products such as MIPs, more seriously than before. It, however, all depends on each company's specific requirement, the nature of funds it has at its disposal and mandates given to its treasury officials.

Talking of MIPs, we all know them as products that have a limited exposure to equity. In most cases, these have a 10-20 per cent cap on stocks, which are collectively used to provide higher returns - more than what a pure debt scheme could have provided. Many investors, especially individuals, are of the view that inclusion of MIPs (given their unique asset-mix) adds value to their overall portfolios.

On another front, MFs' quest for fresh assets continues unabated. While a few fund houses have recently announced new schemes, a number of others are waiting for regulatory approvals to come in. Investors should note that the new proposals will not be presented as IPOs any more. The expression that will be used officially is NFO (New Fund Offer).

Incidentally, most of the proposed NFOs happen to be equity-oriented. Some have even adopted stylish names to explain their rationale. As always, investors would do well to consult financial planners - and not merely product-sellers with aggressive sales spiel - before they actually part with their money.

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

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