The Hindu Business Line : Corporates dominate MFs assets

CORPORATE India invested aggressively in mutual funds for the whole of 2003-04. Now, with more and more companies releasing their annual reports for the past fiscal, the latest year-end numbers are for all to see.

The country's corporate sector, with its twin benefits of scale and size, made serious allocations to all sorts of funds. Liquid and other short-term funds were, as always, among the more preferred products. However, a fair portion of corporate money went to other categories as well. Not surprisingly, there was a sizeable exposure to monthly income schemes and even equity funds.

Consider, for instance, HDFC, which, in its latest annual disclosure, has come up with a formidable list of investments. MFs occupy a critical part of it, thanks to large allocations by the institution during the past fiscal.

There were chunky investments in equity schemes managed by group venture HDFC MF, including the likes of HDFC Growth, HDFC Equity and HDFC Index. There were others, of course, including equity schemes run by UTI, Prudential ICICI and Franklin Templeton.

The inventory on the debt side is also quite impressive, marked as it is by gilt funds, fixed maturity plans and MIPs.

There is no doubt that corporate investors such as HDFC will continue to use MFs in the most efficient manner. They will also make full use of such benefits as lower expenses, which funds gladly offer them at this juncture.

According to one estimate, corporate and institutional investors account for as much as 85 per cent of the total market for funds.. The rest 15 per cent comes from thousands of smaller investors, including the retail ones who have very limited resources at their disposal. Needless to say, the scenario is entirely one-sided, but retail investors are doing little to change it.

Huge quantities of money are still directed towards bank deposits and various government-administered savings options.

Elsewhere in the asset management industry, floating rate funds are the rage, a trend that is reflected in the inflows recorded by these products in recent times. Investors' interest in these schemes may well remain intact in the days ahead, and the market is expected to see the entry of a few more floating rate products.

Among the players that have sought SEBI's approvals are Principal and Sahara. Tata MF for its part has mooted a monthly income scheme which will have a debt component marked by investments in floating rate paper.

For those who are looking out for international news, here's a bit of trivia I picked up from Morningstar. The fund tracking outfit has divided the 25 largest firms into two camps: Those tainted by the recent scandal in the US and those that escaped untarnished.

The tainted ones have suffered $21 billion in redemptions through May, while the others have hauled in $125 billion in net inflows. "If you look at where the money is going within the scandal-free shops, just a handful is sucking up all the cash", is what Morningstar has observed.

For the investor, such a situation gives rise to many critical posers. How can he identify the funds (that is, the most well-managed and ethical ones) that provide the best growth opportunities? How can he create an optimum portfolio, complete with performers that can offer him maximum returns? These are questions that need prompt answers; ignore these, and he could end up in the history books as a big loser.

Feedback may be sent to blcal@vsnl.net

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