Date:26/07/2006 URL: http://www.thehindubusinessline.com/2006/07/26/stories/2006072604171900.htm

Back Funds of Funds lose assets in a tepid MF market

Nilanjan Dey

`Redemptions as on June-end were Rs 347 crore'

Kolkata , July 25

For funds of funds (FoFs) enthusiasts, here is news that could make them frown. FoFs are losing assets, a trend that is being seen as part of the general decline that the mutual funds market has witnessed in recent times.

There were 17 FoFs as on June 30, managing Rs 1,456 crore, a figure that has fallen short of the Rs 1,535 crore or so that these funds managed at the end of May. In April, the corresponding figure was Rs 1,477 crore.

In layman terms, FoF invests in units of other funds, thereby spreading its risks even further.

AMFI, the funds' association, has put the end-June FoF redemption data at Rs 347 crore even as it pegged sales at Rs 51 crore.

While only select fund houses have entered the FoF domain, the two bigger players — Kotak Mahindra MF and Franklin Templeton MF — have recorded a loss in assets compared to end-April figures.

Kotak Mahindra saw a drop from Rs 824 crore in April to Rs 676 crore at the end of June and Franklin Templeton registered a dip from Rs 389 crore to Rs 356 crore.

With other smaller players in the category — such as Prudential ICICI MF (Rs 47-38 crore) and Standard Chartered MF (Rs 25-20 crore) — asset sizes declined as well.

Fidelity MF, however, bucked the trend. Its FoF assets rose from Rs 47 crore in April to Rs 107 crore in June.

Birla Sun Life MF recorded marginal change: from Rs 22 crore to Rs 20 crore during the period.

FoFs have not attained popularity in India, mutual fund sources note. There is also a difference between a pure FoF and a `scheme of schemes', they suggest while referring to products launched by fund houses chiefly to invest in their own schemes and not those managed by rivals.

OptiMix plans debt FoF

OptiMix, which is part of the ING group and specialises in multi-manager products, has worked out a scheme to generate returns from a portfolio of debt-oriented funds.

The proposed OptiMix Active Debt Multi Manager FoF Scheme will choose from among a range of funds, including gilt funds, floating rate funds and liquid funds.

These will be accessed through "the diverse investment styles of underlying schemes selected in accordance with the OptiMix multi manager investment process", the offer document has stated.

Up to 10 per cent may be invested in money market securities.