The Hindu Business Line : Performance is what matters most

The race for assets is becoming more intense with every passing month. As one NFO after another is launched, fund houses are deploying all resources at their command to garner more and more.

The situation, as anyone who closely follows the asset management industry would know, often prompts fundmen to benchmark their mobilisation figures against those recorded by their peers in similar product categories.

So you have Prudential ICICI MF's close-end fund pitted against an identical scheme launched by HDFC MF some time ago. Or a contra fund mooted by industry leader UTI MF viewed against what was achieved by a few others before it. This list can go on and on.

To the lay investor, collection records are mere statistics, not anything more. What could a retail participant possibly do with these numbers? How should he react when he is told that an NFO he has subscribed to has ended up with Rs 1,500 crore? Or Rs 3,000 crore for that matter. The AMCs themselves are quite eager to announce how much their NFOs have mobilised. Many of them send out press releases to newspapers, quoting final collection figures. Sundry other data - the number of investors, the number of collection centres etc - are sometimes thrown in as well.

NFOs - the money-spinner

The point is NFOs allow fund houses to shore up their asset base, at least temporarily. (To what extent a new offer actually collects fresh money - and not what some distributors bring in from other existing schemes - is a matter of debate).

Check out what Kotak Mahindra MF's neat collection of Rs 860 crore (courtesy 85,000 applications from about 140 centres) with its Lifestyle Fund, and you will get the picture.

Whether you like it or not, NFOs will keep on arriving with boring regularity. Even as you read this, a number of proposals are pending with SEBI. The regulator's Web site, in fact, lists offer documents filed by the likes of Reliance, ABN Amro, Fidelity, Kotak and Sundaram. And these are certainly not all. Mind you, we are only referring to equity products here.

Any fund manager worth his salt would like to retain all of what his NFO has collected. A flight of assets a few months after it opens for on-going sales will give him nightmares; a few things will give him greater pleasure than managing more.

With the indices scaling new peaks, it has been relatively easy for mutual funds to sell NFOs. The euphoric equity market is yet to show signs of fading and investors are committing to new offers with marked enthusiasm. While this may now be seen as part of the overall buoyancy, the trend will be truly tested in a bearish situation. But till such time, the industry's cup of happiness will overflow.

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

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