May 29, 2000|
Growth continues to elude growth funds
The meltdown in the stock markets over the past few months has had its effect on growth funds. And supposedly diversified growth funds that have turned quasi-tech funds have been hit a lot more harder.
|Open-ended Growth Schemes
|UTI Sector Fund - Petroleum
|GIC Growth Plus II
|Alliance Basic Ind. Fund (Gr)
|Zurich India Capital Builder
|Magnum Sector Funds - Contra
|IL&FS Growth & Value (Ann Div)
|Mastergrowth Unit Scheme 1993
|Templeton Growth Fund
|GIC Fortune 1994
|IL&FS Growth & Value Fund (Gr)
|Zurich India Top 200
|Mastershare Plus 1991
|DSP ML Equity Fund
|Kothari Pioneer Prima Fund (Gr)
|Reliance Vision Fund
|DSP ML Opportunities (Gr)
|Birla MNC Fund (Growth)
|Primary Equity Fund
|UTI Sector Fund - Brand Value
|Sundaram Growth Fund
|Zurich India Equity (Gr)
|Kothari Pioneer Bluechip (Gr)
|Sun F & C Value Fund (Gr)
|Pru ICICI Growth Plan (Gr)
|Magnum Equity Fund
|Alliance Buy India Fund Fund (Gr)
|Kothari Pioneer Prima Plus (Gr)
|Magnum Global Fund
|Magnum Multiplier Plus 1993
|Tata Life Sc & Tech. Fund (I)
|UTI Sector Fund - Service Sector
|Tata Pure Equity Fund
|Alliance Equity Fund (Gr)
|Birla Advantage Fund
|JM Equity Fund (Gr)
|ING Growth Portfolio (Gr.)
The huge correction in technology, media, telecom (TMT) stocks has pulled down the net asset values (NAVs) of technology funds. But that is understandable, and investors canít really fault the fund managers. A technology fund will invest in TMT stocks and investing anywhere other these stocks will defeat the very objective of a technology fund. But why should the fall in TMT stocks pull down growth funds. Arenít growth funds supposed to be diversified enough to offer investors a hedge against the meltdown in a couple of sectors? Isnít diversification supposed to be the biggest ace in a fund managerís arsenal to hedge against a falling market? It is meant to be, but unfortunately it isnít.
In their enthusiasm to duplicate last yearís performance, fund managers have been guilty of taking an unwarranted exposure to TMT stocks. In many cases as much as half of the fundís net assets are locked in TMT stocks. And even within the TMT sectors there has been poor diversification, with a handful of stocks (Satyam, Infosys, Zee Tele, Global Tele) accounting for a chunk of TMT investments. So a crash in the prices of these stocks has pulled down the fund significantly.
However, industry sources are divided on whether it is the fund manager at fault or the investor. In an interview to personalfn.com, Mr S. V. Prasad (President, Zurich Asset Management (I) P. Ltd.) remarked that taking such a large exposure to software stocks is imprudent and could prove disastrous in the long run (as is more than evident now). However, in another interview to personalfn.com, A. P. Kurian (Chairman, Association of Mutual Funds in India) held the view that being a growth fund with capital appreciation as its objective, a fund manager could invest in stocks regardless of the sector to realise the investment objective and the investor must know what he is getting into before he invests in such a fund.
So who is at fault? Wish there was a third umpire!
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