The Hindu Business Line : US-64: 50,000 investors opt for other UTI schemes

Chennai, May 23 Several mutual funds and insurance companies, apart from UTI Mutual Fund, are in the race to woo investors, who will soon be receiving the proceeds from the redemption of their US 64 bonds.

A whopping 13-lakh investors currently hold the US 64 bonds and they fall in the average age group of 42-45. Of this, 7-8 lakh investors hold 200 bonds or less. The UTI Mutual had set a cut-off date of May 15 for conversion to other UTI schemes and about 50,000 investors, holding about Rs 200 crore in bonds, have already converted to other UTI schemes.

“Already, a lot of bond holders had been asking us for advice on how to re-invest the proceeds from the bonds. We have now communicated to them, suggesting that they invest in our funds such as the UTI Life Style Fund, UTI Leadership Fund, UTI Balanced Fund and Fixed Term Income Fund,” Mr Debasish said.

These bonds, which carry an interest rate of 6.75 per cent, guaranteed by the Government, were issued to investors in June 2003 in lieu of the units held in Unit Scheme 64, following its restructuring. The total value of bonds held by investors is estimated at Rs 8,000 crore and they would come up for redemption on May 30.

Promotional activity

UTI Mutual Fund is offering a special incentive for its distributors and agents, to promote its equity funds — UTI Leadership Fund and Life Style Fund as possible re- investment options for US 64 bondholders. “Such incentives are part and parcel of any promotional activity with a cut-off date,” said Mr Debasish Mohanty, Head-Marketing, UTI AMC. He also pointed out that the incentive offered for this was lower than what was usually paid for promoting new fund offers.

Redemption process

What proportion of the assets does the UTI MF hope to retain? Well, about Rs 4,000 crore of bonds are estimated to be held by the institutional investors. These informed investors may take their own decisions closer to redemption, feels Mr Mohanty. However, out of the retail portion of Rs 4,000 crore, the redemption process had already been initiated for bonds valued at Rs 1,000 crore. Of the remaining, the fund house is hopeful of retaining at least Rs 2,000 crore.

UTI apart, rival fund houses and insurance companies also seem alive to the opportunity. The SBI Mutual Fund has recently released advertisement targeting US 64 bond holders and other insurance companies are looking at the opportunities.

US 64 bonds apart, there is another opportunity awaiting the MF industry in the form of ARS Bonds, also issued by the Specified Undertaking of UTI in April 2004.

Issued in April 2004, to bridge shortfalls in the erstwhile UTI’s assured return schemes, these bonds total to Rs 5,200 crore and are set to mature in March 2009. These bonds have about 7.5-lakh investors.

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