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UTI mess: Time to pay up - Views on News from Equitymaster
 
 
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  • Jul 2, 2001

    UTI mess: Time to pay up

    It was only three years back when the first and largest mutual fund in India was fighting off substantial erosion in the net asset value of its flagship scheme US 64. Well, the behemoth finds itself in a similar position today. Or so it seems by the announcement that the sale and repurchase of units of US-64 scheme have been suspended for six months.

    Letís come straight to the purpose of writing this article i.e. protecting the interest of the retail investor. How can a mutual fund, which incidentally is the only one that does not report to the Sebi, suspend redemptions without giving a notice? Is this a privilege for having a governmental parentage? If it is, then it is time to set it right. And to do this, we do not need another committee (havenít we have enough of them already?). We need action to be taken against those in charge. Those who are responsible for creating this mess!

    To many, this development has been a logical conclusion to the dubious manner in which the fund operates. Indeed, over the last few months several publications have carried articles showing the UTIís flawed investment strategy. While the entire investment community was shunning the HFCLs and the Globals of this world, UTI was lapping up such stocks. Not surprising other funds have turned in a much better performance over the last three months as compared to the UTI.

    Will this latest development trigger much needed reform? It may. But do not bet on it. The government and the bureaucrats have an interest in keeping this over Rs 600 bn giant alive and kicking. On the other hand, the broader market wishes that the big bad boy of the mutual fund industry mend its ways. This development will not only hit the UTI. It will impact the entire mutual fund industry and the stock markets. We all will have to, once again, pay for the sub-par performance of an institution that has refused to become answerable to the regulators.

    The time has come to demand a change. We want change.

     

     

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