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Friday, Apr 13, 2007
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Mutual Funds Markets - Outlook Nilanjan Dey
Kolkata April 12 The sudden rush of private equity investment into small- and medium-sized companies has caught the attention of mid-cap funds that seek to create good portfolios, a relative absence of liquidity notwithstanding. With more launches in the offing, these funds look up to PE investors, many of whom are expected to unlock value sooner than later. With so many PE deals dotting the country's investment landscape in recent times, fund houses believe the flow of initial offers will be far stronger in the days ahead. A section of the small- and mid-sized companies that the PE specialists have targeted will have to tap the market. The emerging scenario, therefore, will be positive for mid-cap funds, for which the investment universe is likely to widen. This is seen as very significant, given the apparent shortage of good stocks in the mid-cap space. Mr Navneet Munot, CIO, Fixed Income, Birla Sunlife MF, who also manages the fund's hybrid products, felt the recent escalation in PE-related activity is a boon of sorts for the asset management industry. The latter has spawned a number of small- and mid-cap funds in recent days and more are probably in the offing, he added. "A number of deals have already gone through, some of them brought about by well-known PE funds. A section of the companies concerned are bound to come to the market before long," he said. Mid-cap funds are often constrained by several factors, say those in investment circles. Liquidity (or, truly speaking, the absence of it) of the stocks they are supposed to target becomes a major issue. Some of these stocks are also said to be under-researched.
Close-end funds
Despite such limitations, the asset management industry has lately rolled out quite a few mid-cap products, some of which have been close-end in nature. In a few stray cases, open-end products (like JM MF's recently launched fund) have also come. Incidentally, almost all major fund houses have open-end mid-cap products by now. In a market that is trending upward, a close-end fund aimed at mid-caps will have its points, said Ms Ashu Suyash, MD & Country Head, Fidelity. "In a close-end structure, it is possible to discourage unit holders from exiting too early and let pass the bigger rally," she maintained. Fund circles note that a variety of PE outfits have shown considerable willingness to pump in money. With a number of new players coming up, the overall allocations will only grow higher. Media, pharma, auto ancillaries, real estate and construction are some of the key areas for anticipated investments.
Negative performance
For most mid-cap funds, one-year returns are now firmly in the negative territory, reflecting their state in recent times. Barring a few odd cases — such as funds offered by SBI MF and Birla MF, which are barely positive — most products in this category have seriously come off their highs. The losers, according to figures pertaining to April 11 released by Value Research, include funds managed by Tata MF (minus 8.29 per cent), HSBC MF (minus 5.08 per cent), Kotak MF (minus 4.66 per cent) and ING Vysya MF (minus 4.88 per cent). For UTI Mid-cap, the one-year score is minus 21.76 per cent.
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