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Tigers And Lions
Photo Credit :
necessarily indicate better
performance (Pic by Amit Verma)
Wasn’t it Shakespeare who said, “what's in a name?” Fund managers definitely seem to think there’s a lot. Catchy names are a good marketing ploy and can work magic with investors, and market willing, with performance as well. Welcome to the mutual fund jungle infested with tigers and lions!
About three years ago, there was excitement and some discomfort in the marketplace with mutual funds giving fancy names to their new fund offers (NFOs). Big and famous fund houses such as DSP Merrill Lynch MF and ING MF tried to hook investors with a T.I.G.E.R Fund and a L.I.O.N Fund, respectively. HDFC MF launched a Relief Bond Fund, that was seen as exploiting the brand image of RBI Relief Bonds, which were 100 per cent safe, but offered attractive returns. HDFC MF had to change it to Fixed Maturity Bond Fund.
But the first two NFOs — essentially equity schemes — roared into the MF jungle. The T.I.G.E.R Fund was an acronym for The Infrastructure Growth and Economic Reforms Fund and L.I.O.N for Large cap, Intermediate cap, Opportunities, New offerings Fund. Their end objectives were similar — to invest in diversified stocks in a growing economy — to over 200 other equity schemes in the market across all the mutual funds. No doubt, the funds were named T.I.G.E.R and L.I.O.N to attract investors’ attention. “Names do not make a fund good or bad,” says Devendra Nevgi, CIO and CEO of Quantum Mutual Fund. “I feel funds should not use exotic names as it can lead to misunderstanding among investors that a fund might be different.”
These were not the trendsetters though. Way back in the early 1990s, there was no dearth of clever fund names such as Canbank Mutual Fund’s Cantriple Plus and SBI Mutual Fund’s Magnum Multiplier Plus Scheme-93 (MMPS-93). Canbank MF’s current avatar, Canara Robeco, has cleaned up its act and, except for Fortune '94, all its scheme names are normal like ‘Equity Diversified’ and ‘Emerging Equities’. SBI MF’s MMPS-93 continues till date.
The list of such funds is long. In addition to T.I.G.E.R and L.I.O.N funds, recent years have seen names like ICICI Prudential Dynamic Star, ING MF’s Optimix 5 Star Multi-Manager FoF, Birla Dynamic Bond Retail and Standard Chartered MF’s Grindlays Dynamic Bond. Clearly, it is a story gone awry. But looking at the overall context of more than 280 equity schemes and 490 debt schemes, the number of schemes with misleading names are limited.
Investors, however, need to be wary. NFOs still try to play on names. The latest example is of Morgan Stanley Mutual Fund’s ongoing NFO that closes on 10 March. It is called A.C.E. and aims to generate “long-term capital growth from an actively managed portfolio of equity…”. It’s just like every other equity scheme yet uses the word ace in its name as a marketing ploy. It is not the first time that this word is being used; DBS Chola MF used it 10 years ago in a fund called ‘Triple Ace’.
The Securities and Exchange Board of India (Sebi) has not taken any action on the use of names. But the capital market regulator issued a directive two years ago asking MF players that the investment objective of their new fund offers must be different from any of their existing schemes.
Sebi needs to do more. “What can probably be insisted upon by the regulator is that abbreviations should not be used and only simple and plain full-length names like ‘equity diversified multi-cap’, ‘equity mid-cap focus’ or ‘equity diversified infrastructure-oriented’ be used,” says A. Balasubramanian, chief investment officer at Birla Sun Life Mutual Fund. That would help.
(Businessworld Issue 25 Feb-3 Mar 2008)