Financial Daily from THE HINDU group of publications
Sunday, Jan 19, 2003
Financial Daily from THE HINDU group of publications Sunday, Jan 19, 2003 |
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Investment World
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Mutual Funds Markets - Mutual Funds Columns - Comment Does success breed complacence? Aarati Krishnan
IT IS now a year and a half since the Unit Trust of India embarked on a makeover, after its liquidity crisis of July 2001. It may be some time before the UTI rebuilds its reputation as an effective manager of equity mutual funds. But the fund has made impressive progress in areas such as enhancing the transparency of its operations and portfolio disclosures, and making its products more investor-friendly. In some aspects, the UTI is now on a better footing than many private-sector fund-houses. Disclosure of portfolios and NAVs: The portfolios of all the UTI schemes are now disclosed monthly on its Web site. The portfolio disclosures are comprehensive, with access to the complete portfolio of each scheme and the number as well as the value of shares under each of its holdings. More important, investors have access to archival information for each scheme, in terms of portfolio disclosures, annual accounts and historical NAVs. Few private mutual funds have comparable features on their Web sites. Rejigging product features: The schemes have also been made more investor-friendly. In April 2002, the UTI slashed the entry and exit loads on a range of its equity schemes from 3 or 5 per cent, to 2 per cent. It has enabled free switching between its various schemes at NAV. It has also capped the expense ratio of both its passive index funds at 0.75 per cent, a first in the industry. In contrast, after starting out with a bang, bank-sponsored and private sector mutual funds have been rather lackadaisical about stepping up disclosures to their investors, especially through the Internet. A fund house the size of Alliance Capital does not carry either the past portfolios of its schemes or its historical NAVs on its website. Just a handful of fund houses regularly inform their investors about dividend declarations or other events in the fund. And fewer still allow investors easy access to earlier financial statements. A case of success breeding complacence?
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