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`Not an impressive show by new fund offers'

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Nilanjan Dey

Kolkata, July 21

HERE is a pointer for those who plan to invest in new equity funds: Funds launched since the beginning of this calendar year, including the ones that clocked hefty collections, have mostly turned in indifferent performance since inception.

A look at the schemes' NAVs shows what the fund managers concerned have delivered vis-à-vis the broad market that seems to have sprinted well ahead during this period.

The MF industry, which has witnessed a steady flow of NFOs (new fund offers) since January this year, is well aware of the realities, sources indicate. Such `realities', they point out, stem from the somewhat sluggish growth in overall corpus recorded by the industry - which also reflects in the fact that not too many new investors were roped in.

"The time since these funds were launched, the markets had done a near gallop to their all-time highs, albeit with some hiccups in the middle. But the rise by any standard had been a secular upward movement," says Mr Prasunjit Mukherjee, head of distribution firm Plexus Management Services. His views are based on NAVs and annualised values of schemes as on June 29.

Among the new entrants, Fidelity Equity has delivered the best numbers, performing way ahead in the group, followed by funds managed by ABN AMRO and HDFC. The three have returns in excess of 40 per cent annualised, the annualisations being worked out in the usual manner. In comparison, the top two collectors Franklin Flexi Cap and Reliance Equity Opportunities are quite far down the list, with returns at just 17 per cent and 26 per cent respectively.

The annualisations have been worked out by subtracting the value (June 29) from the launch value (first day NAV) and dividing by the launch value. The resultant figure is divided by the duration and then multiplied by 365 and then by 100. Therefore, a fund with a value of Rs 11 in a period of 30 days would have the following: (11-10)/10)/30)*365*100. The annualised return here is 121 per cent.

The review tried to find out how effective have these schemes been in benchmarking themselves.

And, given the fact that they all have separate benchmarks, the BSE-100 was used. This index, about 40 per cent of which is made up of mid-cap stocks, was taken as its composition is fairly broadbased. Not more than a few schemes provided returns in excess of what was given by the index.

ABN AMRO Opportunities (which opened on May 1), for instance, had an excess return of 18.76 per cent, while HDFC Premier Multi Cap (April 20) delivered 32.23 per cent. Fidelity Equity (May 18) gave 57.86 per cent in comparison.

As for the calculations, Plexus has cited the instance of ABN AMRO Opportunities, which was opened on May 1, 2005 with an NAV of Rs 9.427. On June 29, when its NAV was Rs 10.244, it had a 59-day history. The return percentage is 8.6665, while the annualised figure is 53.6153 per cent.

"Of the 20 schemes under the microscope, merely six returned results better than the benchmark," Mr Mukherjee said, adding that the new collections should perhaps have stayed invested in just the index.

(This article was published in the Business Line print edition dated July 22, 2005)
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