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Get a load of your mutual fund - Views on News from Equitymaster
 
 
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  • Mar 18, 2002

    Get a load of your mutual fund

    Before you decide to invest in a particular mutual fund scheme, it’s a good idea to get an overview of the fund house as a whole. If the other schemes of the fund house are doing well, then you could reach a level of certainty about your proposed investment in the fund house.

    Often investments in a particular fund are dictated by sentiment or your agent’s ‘tip’ (so he can collect his attractive commission) or sheer impulse. That’s the reason a lot of mutual fund investors burnt their fingers in the past be it during Morgan Stanley’s IPO (initial public offering) in 1993, or the bull runs in 1992 and 1994, or the tech bubble in 1998-2000. Most of these investments were made on sentiment and investors were misled by the excessive noise around them. When these investments bombed, there was a major disconnect in the minds of investors and they left the industry in hordes disillusioned by mutual fund as investment avenue.

    A little research always helps in assessing your proposed investment. You would not give Rs 10,000 away to anyone without inquiring about his credentials or experience, be it a doctor, a lawyer or even a car mechanic. There is no reason for you to give Rs 10,000 away to an XYZ Mutual Fund without looking into the performance and credentials of the fund house.

    Get a load of this!
    SCHEME NAV (Rs) NAV DATE 1-M (%) 6-M (%) 1-YR (%) INC (%)
    ALLIANCE 1995 D 31.03 15-Mar 2.4 35.9 7.6 27.1
    ALLIANCE 1995 G 48.37 15-Mar 2.4 35.9 7.6 26.4
    ALLIANCE BASIC D 10.47 15-Mar 7.1 54.4 24.8 8.1
    ALLIANCE BASIC G 10.47 15-Mar 6.9 54.2 24.6 8.1
    ALLIANCE BUY D 5.18 15-Mar 2.0 16.1 -1.9 -27.6
    ALLIANCE BUY G 5.18 15-Mar 2.0 16.1 -1.9 -27.6
    ALLIANCE CASH D 1,000.41 15-Mar 0.5 3.3 7.1 7.2
    ALLIANCE CASH G 1,385.47 15-Mar 0.6 3.5 8.0 8.9
    ALLIANCE EQUITY D 17.42 15-Mar 3.4 48.8 1.5 31.9
    ALLIANCE EQUITY G 27.56 15-Mar 3.4 48.7 1.5 31.9
    ALLIANCE GSEC LT D 1,136.07 15-Mar -0.5 12.7 20.3 14.7
    ALLIANCE GSEC LT G 1,414.19 15-Mar -0.5 13.5 22.5 16.0
    ALLIANCE GSEC ST D 1,030.09 15-Mar -0.1 6.1 10.4 9.8
    ALLIANCE GSEC ST G 1,283.90 15-Mar -0.1 6.7 12.0 11.1
    ALLIANCE INC (QDIV) 9.96 15-Mar -0.6 - - -0.6
    ALLIANCE INC D 11.03 15-Mar -0.5 9.5 16.0 12.5
    ALLIANCE INC G 18.75 15-Mar -0.4 10.2 16.8 13.3
    ALLIANCE MIP G 15.05 15-Mar 0.4 11.2 13.8 16.0
    ALLIANCE MIP MD 10.37 15-Mar 0.3 10.7 12.5 14.1
    ALLIANCE MIP QD 10.6 15-Mar 0.4 10.0 11.8 14.0
    ALLIANCE NEW MIL D 4.6 15-Mar 5.3 76.2 -14.0 -44.3
    ALLIANCE NEW MIL G 4.6 15-Mar 5.3 76.9 -13.9 -44.3
    ALLIANCE TAX 96 58.35 15-Mar 5.4 59.7 11.3 44.1
    (Returns over 1-Yr are annualised)

    By way of illustration we have taken the schemes of Alliance Capital Mutual Fund, one of the most aggressive private fund houses in the country. A cursory glance at the fund house’s schemes reveals that its income funds have done far better than its equity funds, and this despite the fact that Alliance is known more for its equity funds than its income funds. The fund house’s flagship equity (Alliance Equity) and balanced (Alliance 1995) products with 1.5% and 7.6% (absolute) growth respectively have underperformed its peers like Pioneer ITI, Templeton, HDFC and Zurich India. Its sectoral offering - Alliance Basic with a 24.6% (absolute) appreciation has done well. All its income offerings (Alliance Income, Alliance Cash, Alliance Gsec) have performed well in line with the performance of its peers.

    Figures like this can help you assess the fund house’s credentials. For instance, if you were planning to buy an equity scheme from Alliance Capital, the above table would tell you that its not really done much, at least not as much as it ought to have done. This may encourage you to check out some of its peers that we mentioned above to see how they have done as a fund house. A little study and research doesn’t hurt anyone. In today’s complex financial world, its better to be safe than to be sorry.

    If you are in Mumbai and are interested in mutual funds, bonds or other investment products, please register here.

     

     

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