Kothari Pioneer Monthly Income Plan receives lukewarm response

Aabhas Pandya

Blame it on the chaotic market as Kothari Pioneer's Monthly Income Plan has failed to garner an impressive mobilisation in its initial offer, which closed for subscription on September 28, 2000. According to preliminary estimates, the MIP from Kothari Pioneer has mobilised around Rs 60 crore and the final collection could be in the vicinity of Rs 80 crore.

Kothari Pioneer is the second mutual fund, which braved the adverse market condition in September, to launch a monthly income plan. Earlier, Reliance AMC garnered Rs 80 crore from 6,000 investors. While the mop up by Reliance Mutual Fund was impressive, given its small size and marginal network, the collection in Kothari's MIP has failed to match the AMC's strong brand equity.

Kothari Pioneer is one of the premier mutual funds in the country with assets under management of over Rs 2500 crore and a well-entrenched retail base of 6.5 lakh investors, which is also the highest under any private sector AMC. Given that monthly income plans is essentially a retail product, the inflows in Kothari's MIP is indeed disappointing. This was the second fund from the AMC in the current calendar after KP Internet opportunities Fund mobilised a whopping Rs 550 crore from 1.5 lakh investors in March.

The poor response to Kothari's MIP underlines the fact that timing continues to be a crucial factor, when it comes to launch of a fund. With both equity and debt markets in a tumultuous phase, investors are either sitting on sidelines or are returning to the "safer" confines of fixed deposits. In such a scenario, both the AMC's profile and the product has failed to attract investors. On the other hand, MIP from Templeton had mobilised Rs 160 crore earlier this year, when both equity and debt markets were on a roll. Even a relatively small player like Sun F&C had also mopped up Rs 60 crore in March in its MIP.

Besides the timing of launch, the inability of Templeton and Sun F&C to pay monthly dividends in their MIPs has cast a shadow on KP's IPO. "Investors are clearly looking for those MIPs, which have continued to pay a monthly dividend even in a volatile market. No wonder, money is either moving to Alliance MIP, which has not skipped a dividend since launch in June last year or to UTI's MIP, which offers assured returns,'' says an official with a rival mutual fund, which will soon launch a MIP. "The problem with Kothari was that it continued to stress on monthly income, especially at a time when two funds have failed to make a monthly payout. The investor is skeptical and however good the AMC, he first wants a track record for monthly dvidends,'' he adds.

The poor performance of KP Internet Opportunities Fund (KP IOF) has also proved to be a stumbling block for KP MIP. Although the two products are vastly different, some investors shunned KP MIP after poor returns in KP IOF. Currently, KP IOF is hovering around Rs 7.5, which means a 25 per cent loss to the initial investor.

Add to it, Kothari Pioneer is essentially strong at managing equity funds and has little appeal, when it comes to debt funds or MIPs. Monthly income plans are also essentially debt oriented since they invest 85 per cent of the corpus in fixed income instruments. In fact, of the 6.5 lakh investors with Kothari, as many as 6.3 lakh are invested in the AMC's equity funds with an asset base of Rs 2000 crore.

Source: Value Research

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