The Hindu Business Line : New offers galore

THE market for mutual funds is again awash with new offerings. With a number of proposals waiting to be cleared by SEBI, investors will soon see a marked expansion in the range of options before them.

You might argue that there is nothing new in the efforts put by fund houses to outdo each other in this respect. But the question is, will this expansion be really meaningful for the lay investor, or will it confuse him even more. If some quarters are to be believed, the ordinary man may not be altogether benefited, the profusion of new thematic offers notwithstanding.

No variety: In some cases, fund houses are simply bringing in products that are greatly similar to at least one of their existing schemes. While we are not going into actual names here, it is quite clear that duplication is rife in the world of MFs.

The situation, some say, is becoming more complicated every day, especially because some players are homing in on similar-sounding themes.

A quick look at some of the new proposals may be appropriate here. The fund houses that have been active include Tata, SBI, Principal and Chola. UTI, the biggest player in the AMC space, is learnt to have worked out its next offer. We are talking about equity schemes alone. (This is not to say that funds are not active on the debt side - witness the sheer number of fixed-maturity plans that are being lined up. The pipeline is bursting, you would say!).

Obviously, fresh offers will translate into a lot of work for a great number of people. Marketing executives working for various AMCs will be busy; so will be the distributors. There will be a flurry of sales calls, distributor meets, exclusive appointments with large corporate clients, hoardings at major street corners, and later, as sources indicate, even sponsored trips to exotic, overseas destinations. (One hears that intermediaries these days are not satisfied with simple trips to Singapore or Mauritius. They now want China and Egypt).

Lower pick-up: Meanwhile, certain interesting (and internationally relevant) figures are just out. Prepared by Investment Company Institute, these show that MF assets worldwide have snaked up to $16.41 trillion at the end of Q2 of 2005. Net cash flow to all funds was $166 billion in the second quarter, compared with $215 billion in Q1.

Inflows to long-term funds have actually slowed, while money market fund flows essentially netted to zero in the quarter. Outflows in the Americas were offset by inflows in all other regions.

AMFI newsletter: Let us end with what we have picked up from the last AMFI newsletter. The annual International Investment Funds Association, AMFI says, has recently adopted four "guiding principles". These are:

* Investment funds should be operated at all times in the interest of their investors

* Investors in funds should be provided with the information needed for informed decisions

* The process by which funds are sold by intermediaries should be transparent, and have as its goal the provision of suitable advice

* Funds should be able to compete in the marketplace on a level playing field with other savings and investment products

Profound thoughts, would you say? One sincerely hopes that the fund industry in India keeps these principles in mind in the days ahead.

Fundspeak

We believe that volatility will remain high in the market over the short-term driven by both external and internal factors. However, over the long-term, we continue to be positive on the markets.

JM Mutual Fund

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

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