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The new order at UTI

Aabhas Pandya

Finally, the order is changing at Unit Trust of India. The bad news for the largest fund house is that its old equity funds continue to bleed. Given the poor returns from these funds, most of, which are seven-eight years old, it is evident from the fall in unit capital that investors are pulling out. The good news is that the new generation funds from the mutual fund giant, with their high returns, are attracting fresh investors in droves. No wonder, the old order is dying a slow death, even as UTI aggressively markets its sectoral series and doles out attractive dividends in software and services sector funds.

Consider this - in the one-year ended June 30, 2000, the basket of nine old guards has seen assets under management go down by an average 26 per cent. On the other hand, the combined unit capital is down Rs 8.60 billion or 27.72 per cent to Rs 22.44 billion. These equity funds either went open-end on the eve of redemption or are closed-end but offer repurchase.

For instance, Masterplus has seen its unit capital go down by nearly 31 per cent from Rs 5.06 billion on June 30, 1999 to Rs 3.5 billion on June 30, 2000. The fund had gone open-end in July 1999. With a marginal increase in net asset value, the fund's assets under management have also dropped from Rs 11.5 billion to Rs 8.32 billion. The largest equity fund in UTI's stable, Mastergain '92 has been the worst hit. With a measly return of 2.43 per cent since launch, the fund has lost a whopping 31 per cent of its unit capital in the last one year. The size of the fund has shrunk from Rs 20.23 billion to Rs 13.34 billion.

On the other hand, the growth sector series from the Trust is guzzling fresh investments. The combined unit capital of the five funds has shot up from Rs 540 million to Rs 2.71 billion. With the NAVs galloping, the assets under management have also climbed by 650 per cent from Rs 630 million to Rs 4.76 billion. It does not come as a surprise that UTI Software has been the favourite among investors with its size moving up from Rs 240 million to Rs 2.37 billion. In the one year ended September 30, 2000, the fund has delivered a return of 42.49 per cent. The fund's specialty fund, UTI Services Sector, has given a one-year return of 169 per cent!

No wonder, it's a clear case where investors are punishing the non-performing funds while investing in funds with impressive returns under the same mutual fund. Unlike a few years back, investors today have a wide variety of funds to choose from and would redeem if the performance numbers are not upto their expectation. Thus, one could soon see the combined sizes of new generation funds overtake their old counterparts at UTI.

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