Nilanjan Dey

Kolkata, Feb. 27

THE next few months will see a lot of action in the asset management space. A clichéd statement, that but like most things clichéd, true.

To elucidate, here is an attempt to showcase some of the elements that investors in mutual funds are likely to come across. Many of these may well stem from product development and marketing strategies that fund houses are expected to adopt.

Sales pitches will rise, distributors will turn even more aggressive, fundmen will again try to entice investors with smart, new-generation options. The latter will probably include a few schemes aimed at investors based abroad, while Indians may have a chance to invest in commodity-linked funds.

Fund managers will worry about macro and sectoral trends in the post-Budget phase, while factors such as inflation and government borrowings will continue to play major roles.

There will be PF money chasing equity, as announced by the Government in late January. And SEBI, the agency that regulates asset management companies, will have a new chief, one who has already referred to `punishment' and `justice', albeit briefly.

Talking about specifics, the coming days will be important for Alliance Capital Mutual Fund's unit holders. Alliance schemes will migrate to the Birla Sun Life fold and investors will expect the latter to position the new arrivals in a suitable manner.

Schemes like Alliance 95 and Alliance New Millennium probably have a genuine following of their own. It will be interesting to see how they perform once they become part of the Birla MF family.

For those who are looking at initial offers, the list of schemes that are expected to hit the market in the days ahead is not brief. It includes trendy products worked out by Tata MF and Chola MF, a few funds carrying tags such as Opportunities and Dynamic and at least one `commodity' play from the SBI MF stable. As things stand, not many debt offers are being structured.

Before we end, here is a poser for all to consider. Is Standard Chartered Mutual Fund, which has so far dabbled only in debt funds, finally turning towards equity products? No, if you go by the stand taken by the fund's top brass. Yes, if you root for what a good many people in the market have started believing.

Let us add here that Mr Naval Bir Kumar, head of StanChart MF, did not confirm that there were plans to foray into equity funds when we asked him the other day about the possibility. In fact, he told us quite resolutely that there was nothing on the cards!

We certainly don't dispute that standpoint. However, here are a couple of things that the MF should consider before it adopts a completely inflexible attitude. One, returns generated by debt funds are rather unattractive these days and traditional debt products may not mobilise enough if the current situation continues unchanged. Two, equity is where the action is. Equity funds have generally performed well in the recent past.

More importantly perhaps is the fact that investors seem to be favouring these schemes despite the obvious risks associated with such investments. Check out the kind of money that has lately moved into equity funds, new and old. The magnitude of inflows, especially the inflows secured by initial offers, may well take you by surprise.

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The ensuing Budget could provide directions as regards the future pace of reforms, which could be the key to improving fiscal situation and sustaining strong overall economic growth in the country. Sundaram Mutual Fund

(This article was published in the Business Line print edition dated February 28, 2005)
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