The Hindu Business Line : Long-term gilt funds face reversal in investor mood

ARE long-term gilt funds witnessing a reversal of investor sentiments? Strange as this may sound, the latest inflow figures logged by some of these schemes suggest exactly that.

A listless g-sec market and negative news flow seem to have little impact on investors who have actually led to a situation marked by net inflow in September. The trend has partially altered from what was seen in the previous month.

A review of select long-term gilt funds pegs the net inflow at Rs 341 crore last month compared to net outflow of Rs 678 crore in August. Their combined assets under management - about Rs 2,870 crore - however still stand at a minuscule 2.24 per cent of the assets managed by the MF industry.

The biggest gainers, as listed by IDBI Capital in the study, include long-term g-sec schemes offered by Reliance MF and UTI MF. The two had assets of Rs 109 crore and Rs 82 crore respectively as on September 30. The top losers include SBI Magnum Gilt LTP, Tata Gilt Securities Fund and Templeton GSF Composite Plan. Their growth options managed assets of Rs 634 crore, Rs 421 crore and Rs 324 crore respectively on that date.

Despite the recent changes in asset sizes, the MF industry is not too hopeful about long-term gilt products at this juncture. Also, the various asset management outfits do not report a general shift in sentiments.

"It is early days yet," said Mr Sanjay Sachdev, MD and CEO of Principal MF, when asked about the industry's immediate outlook on this front.

Return figures too are not seen as spectacular, it is pointed out. The review, which considers 24 schemes, puts it at 3.19 per cent (annualised), higher than 2.13 per cent recorded in August.

Sources refer to the last couple of weeks of the past month, which saw g-sec yields moving up somewhat. They also pointed out that the market for gilts is not likely to see any major developments in the coming weeks. The virtual absence of any positives coupled with an expected volatility will determine the shape of the market, investment circles feel.

Given this situation, fund houses believe many investors will remain circumspect, especially when it comes to investing in longer-term options on the debt side.

It is also pointed out that quite a few gilt funds (of the long term variety) are currently "close to cash." In some cases, such liquid assets account for as high as 40 per cent.

Among the schemes that have a relatively high cash/call component are Birla Sunlife G Sec Fund LT, HDFC Sovereign Gilt Fund Investment Plan, Kotak Gilt Investment Plan and Reliance G Sec Fund LTP Retail. Their liquid assets are in the 27-46 per cent range.

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