Mutual Funds Mutilated


By

Rahul Gosain
Student - PGP (2007-2009)
Specialization-Finance
Alliance Business School
Bangalore
 


Most of the top rated funds, many of which gave a yearly average return of greater than 23%, are hitting 52 week lows right now. Only 2 of the top 10 funds across categories have managed to hold on to positions in the top 10 over the last one month. These were, UTI Gold Traded Exchange Fund and Gold BaES Fund.

Let us look at the top 10 funds across all categories over the last 1 year:

Rank

Scheme Name

NAV (Rs) as on Jul, 3, 2008

Last 12 Months %

1

UTI Gold Exchange Traded Fund

1315.55

50.25

2

Gold BaES

1312.70

50.07

3

DBS Chola Monthly Income Plan-Growth

16.36

22

4

Reliance Diversified Power Sector Find-Growth

51.20

14.80

5

ING Income Fund-Institutional Plan-Growth

21.62

12.03

6

Franklin India International Fund

10.57

11.50

7

ING Income Fund-Regular Plan-Growth

20.54

11.19

8

Birla Sun Life Income Plus-Growth

34.57

11.15

9

Birla Sun Life Dynamic Bond Fund-Retail-Growth

12.99

10.87

10

LIC MF Fixed Maturity Plan-Series 22- Growth

11.27

10.75


Source: www.mutualfundsindia.com

Now let us now look at top 10 funds across all categories over the past one month:

Rank

Scheme Name

NAV (Rs) as on Jul, 3, 2008

Last 1 Months %

1

Quantum Gold Exchange Traded Fund-Growth

654.68

6.70

2

Gold BaES

1312.70

6.69

3

UTI Gold Exchange Traded Fund

1315.55

6.69

4

Kotak Gold ETF

1316.01

6.67

5

Escorts Gilt Plan-Growth

16.58

6.48

6

DSP Merrill Lynch World Gold Fund-Growth

14.50

2.41

7

IDFC Fixed Maturity Arbitrage Fund-S1-Plan A-Growth

10.45

1.49

8

Escorts Floating Rate Fund-Growth

11.82

1.13

9

Kotak Quarterly Interval Plan-Series 1-Growth

10.74

1.08

10

LIC MF Fixed Maturity Plan-Series 31- Growth

11.27

1.07


Source: www.mutualfundsindia.com

The benchmark Sensex has shed over 21% in the past one month and the Midcap index has eroded by 23.94%. The aftermath of this is very well visible in the form of over 80% of the listed 300+ equity funds hitting their 52 week lows, most of them with negative returns. On the other hand, Gold Funds and Gilt Funds have managed to hold on to decent NAVs even amidst the bloodbath over the past one month.

What is astonishing is that 4 of the top 10 funds currently are Gold Traded funds which have over 99.85% of their net assets invested in gold. Less than 0.15% of their net assets are invested in the form of current assets. Gold prices have risen by over 6% over the past one month.

The GILT funds are those that invest in Government Securities. Most of the top performing GILT funds have invested about 70% of their net assets in the GOI 2015 Sovereign Security and the balance 30% is a combination of GOI Sovereigns maturing in 2027 or 2012.

Amongst Gold funds, the one with a mixed bag approach is the DSP Merrill Lynch World Gold Fund-Growth. 98% of its net assets are invested in another fund managed by Merrill Lynch (
DSP Merrill Lynch International Investments Fund - World Gold Fund). The remaining 2% is in the form of money market instruments to CBLO and another self managed fund by Merrill Lynch.

IDFC Fixed Maturity Arbitrage Fund-S1-Plan A-Growth floats with the highest risk carried. It has 66.67% of the investments in the form of equity, 18.33% Bank Deposits, 9.97% Money Market Instruments, 4.34% Current Assets and is sitting on 0.7% Cash. The top holding for most equity funds in the top 10 seemed to be stocks from the TATA group of companies.

Kotak on the other hand has over 87% of its net assets invested in the form of binds with State Bank of India and State Bank of Hyderabad. The remainder is in the form of Current Deposits with ICICI Bank.

What is becoming interestingly clear now is that with the markets not far from hitting sub 12000 levels and a very thin possibility of the index closing near 18000 by the end of the year, investors will have to learn to live with 11% or less average annual returns on most schemes and be satisfied with them. The so called bull run is far off the chart, keeping in mind that the Indian economy is not a strong exporter of commodities and in-fact imports 5% of its GDP in the form of Crude Oil. The safest bet for the medium run seems to be the more conservative funds.
 


Rahul Gosain
Student - PGP (2007-2009)
Specialization-Finance
Alliance Business School
Bangalore
 

Source: E-mail July 4, 2008

 

        

 

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