NFOs and the ideas they seek to capture have made headlines time and again

Nilanjan Dey

Is their obsession for newer equity products actually destroying the asset management industry's faculties for discovering sound investment themes?

Or are there lots of ideas that are yet to be truly identified and tested? While answers to these questions are not easy to find, let us refer to a few pointers that may help you to reach a conclusion one way or other.

Consider this

: A tidal wave of NFOs has hit the market in the last few years, many of them competing products that seem to be merely carrying different tags. Investors have seen a fair number of high-decibel launches, including a few that have been worked out by such leading players as Reliance, Prudential ICICI, UTI and HDFC.

With so many new funds around, distributors have had a field day - after all, as some one pointed out recently, NFOs were finally being bought in India and not simply sold!

The point is the new fiscal may not be too different in terms of variety on the NFO front. There will indeed be a round of fresh proposals that will try to latch on to novel concepts. Fund houses, which are expected to step up their efforts to garner more through better delivery channels, will want to appeal to investors in ways that have not been tried before.

You may argue that the issue we are trying to raise here is not altogether original. True, NFOs and the ideas they seek to capture have made headlines time and again. But as long the spirit of new offers is alive, the debate over their real efficacy will also continue. This debate, future generations may well say one day, is as old as the hills!

You may also point out that fresh offers are important from a whole new point of view - continuity. Fund houses, after all, will need fresh money. And investors will need smarter, brasher principles on the basis of which they will allocate their newly-created surpluses. Good argument, one could not agree with this more. Yet, at the end of the day, investors would do themselves a great service if they are not bogged down by allocations that are merely comparable and repetitive. The quality of their portfolios will not necessarily improve with such replications.

New themes

Check out some of the proposals that have been mooted in recent days and you will know where and how the asset management industry is trying to score. Sahara MF has worked out a fund titled R.E.A.L., an abbreviation that stands for Retail - Emerging And Leaders. Deutsche MF has conceived a scheme - Green India Fund - that will identity companies focused on rural India. ING Vysya MF has fashioned what has been called Core Industries Fund. There are others, each telling a story of its own.

It will also be interesting to find out where the new offers of today stand, say, one year from now. Investors will want to know how they have scored, whether they have beaten their benchmarks by a decent margin and whether it will still make sense to stay invested.

If there are no questions about performance, some will surely want to remain committed. If questions do arise, some may wish to pull out and perhaps consider investment in other NFOs. In short, it will then be back to square one.

Feedback may be sent to nilanjan@thehindu.co.in

(This article was published in the Business Line print edition dated April 3, 2006)
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