BUSINESS
This is because May-July is traditionally a period when investors stay off fresh investments as they have several other expenses to cater to.
Even as fund houses rush to launch mutual fund schemes before the new regulations come into effect from July 1, 2010, the response from investors is far from encouraging.
This is because May-July is traditionally a period when investors stay off fresh investments as they have several other expenses to cater to.
For instance, this is typically the time when people have just spent on their annual holiday, have to pay for school and college admissions, not to forget the marriage season, which was at its peak starting May 16, 2010.
Mutual fund distributors said many investors have, in fact, been redeeming past investments and locking up the money in options that give fixed returns.
Nelson Fernandes, financial advisor at Krushna Finance, said, “The response to NFOs are not good. There have been some NFOs, but this is an off season for retail investors as they have just completed school and college admissions and have no new money.”
“People don’t usually invest during the June to July period and are in a holiday mood. Only after August they start planning for taxation and so people invest during September to March,” he added.
People who usually invested around Rs 1 lakh are investing only Rs 20,000. Markets too are a little lukewarm for investors to get in, Fernandes said.
Investors who have in the past invested in NFOs, too, are not keen anymore. Harubhai Sanghavi, a Mumbai-based mutual fund investor, said, “I don’t invest in any and every NFO because there have been instances when after the NFO closure, the NAV fell below Rs 10. So, I can get more units by investing when the market has dragged down the NAV.”
Bundling up of too many new schemes at the same time is making people selective in investing, said advisors.
“With so many NFOs bunched up together, we pick and chose which one to suggest. Even if a person is ready to park money, he says, ‘How many do I invest in?’. Some investors have strictly said no to NFOs. They say I will look at the performance and invest,” a Mumbai-based advisor not willing to be named said.
Eight new equity funds, over 20 debt and two hybrid schemes have been launched in the past couple of months, most closing this month.
Investors are looking for “different” schemes. “People invested in the Canara Robeco InDiGo fund as there was a novel idea associated… Others put money in SBI PSU Fund as they have faith in PSU and the brand SBI,” the Mumbai-based advisor added.
“There is a lot of hype around new fund offers. We do not advise investing in them unless they are very different in what they have to offer,” said Suresh Sadgopan, principal financial planner at Ladder 7 Financial Advisories.
A Nagpur-based advisor said investors are opting for fixed income schemes. “Response to NFOs is very poor. There is no fresh money coming in and redemptions are high. They are redeeming and putting money in fixed-income schemes,” he said.
The uncertainty on interest rates is also impacting fund houses looking to mop up money in fixed maturity plans and bond funds.
Fernandes said, “In debt schemes, the investment is usually by HNIs, ultra HNIs and institutional investors. They are expecting a change in interest rates and are hence staying away.”
Some fund houses, however, have been able to garner some assets. “There has been decent demand for the new fund offers,” said Waqar Naqvi, chief executive officer of Taurus Mutual Fund, which recently launched its Taurus Nifty Index Fund. He suggested that those funds which have had the backing of a bank to distribute it have met with more success.
With fund houses barred by Sebi from paying upfront commissions to distributors, getting investors is tough. They are forced to pay the distributors out of their own pocket as investors are not remunerating agents, and collecting assets otherwise is difficult.
“Generally the payout is 0.50-0.6%, but in some NFOs, 1% has been offered. It is not sustainable for us as we have to run around. Far from paying advisory fees, investors demand rebates from us,” said the Mumbai-based advisor.
“Remunerating a distributor is becoming difficult. We are all losing investors. We are trying to educate investors in our own way, but MF investors are reducing,” said a fund manager with a medium-sized asset management company.
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