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US-64 will soon be 'watched' - Views on News from Equitymaster
 
 
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  • Aug 13, 1999

    US-64 will soon be 'watched'

    In line with the Deepak Parekh committee recommendations, US-64 may soon come under SEBI's purview. UTI's schemes are governed by the Unit Trust of India Act, 1964, unlike other MFs schemes, which are governed by SEBI. Currently, US-64 does not disclose its portfolio as often as is required by Sebi. Moreover, its sale/repurchase prices are not linked to the NAV, as is the case with other schemes.

    In the coming week, SEBI - the market watchdog, has indicated that it will initiate talks with UTI - India's largest MF player.

    As on June 1999, UTI had assets in excess of Rs 610 bn. Its flagship scheme - US-64 (net assets in excess of Rs 160 bn) came under focus following revelations of negative reserves in FY98.

    US 64's mobilisations during the special offer period in July 1998 were dismal. The mobilisatons dropped 67% to Rs 12.9 bn (Rs 31.1 bn in July 1998). The decline in collections is a matter of concern for UTI, particularly when its private sector counterparts continue to post sharp rise in fund collections.

    Last year, the sharp decline in US-64's reserves came as a shock to most investors. However, those monitoring the scheme weren't really surprised. Until last year, US-64's investments were skewed towards equities (more than 70% of portfolio). Many analysts criticised US-64's investment philosophy, given the fact that it was dealing with such a large quantum of investor funds. Although the value of the portfolio had started to decline, UTI chose to ignore it. US-64's more than 20 m investors learnt that the hard way, when the value of US-64's portfolio eroded sharply.

    If the Deepak Parekh committee recommendations are implemented, US-64 will have to disclose its NAV more often, and investors will be allowed to enter and exit the scheme at NAV-linked prices. Also US-64's portfolio will be public knowledge, and no more a closely guarded secret.

     

     

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