The Hindu Business Line : Equity funds launched in 2004 fare poorly

A number of equity funds launched in 2004 have disappointed investors, with some of the theme-based schemes faring particularly poorly since their introduction.

An uncertain stock market and the cautious stand adopted by fund managers are being cited as the main reasons why these funds have been unable to perform better.

The current year has so far seen a number of initial public offerings on the equity side, offered by fund houses eager to extend their product portfolios and tap new investors.

Schemes that have been launched this year include sector-specific products ( such as auto sector funds from UTI and JM) and thematic players such as DSP Merrill Lynch's TIGER and Kotak Mahindra's Global India.

A review of the latest net asset values (NAVs) underlines the kind of returns secured till date by the unit holders who had put in money during the initial offer period.

As investment circles point out, the returns generated in some cases (say, over the past three months or so) do not compare too well with the average performance of all funds in the category.

Fund managers generally refer to the scenario that has prevailed on the equity front since the early days of the current calendar year. The character of the market, they feel, has changed significantly when viewed against the trends witnessed during 2003-04.

Their mood is summed up by Mr Rajat Jain, CIO of Principal MF, who thinks that the broad market may not see a comprehensive upside this year.

"This is essentially a stock picker's market; stock selection will be a factor that can make a big difference in the performance numbers," he told Business Line.

The last six months or so have been especially turbulent for equities, resulting in rather ordinary performance by the fund houses. For the six months ended September 13, diversified funds provided a mere 2.68 per cent on an average.

ING Vysya Nifty Plus, launched in February 2004, has turned in 10.29 per cent for the three-month period ended August 31, compared to its segment average of 13.75 per cent. The scheme, incidentally, has actually scored a negative 12.10 per cent since launch, according to data compiled by Value Research.

UTI's banking sector fund, which has gone down by 15.4 per cent since its introduction in April this year, may also be considered in this context.

Its three-month record, nevertheless, is positive at 3.93 per cent. The benchmark index in this case is the BSE Bankex.

Not all schemes, however, have provided investors with a negative performance. UTI's Mid Cap Fund, which has managed to ride the mid-cap rally, has delivered 11.1 per cent since its launch in April.

On the other hand, UTI's Large Cap Fund (launched at the same time) has given a negative 11.3 per cent.