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US-64 to go NAV-based between Oct and Jan: Damodaran

Dispelling fears that the Unit Trust of India is a sinking ship, its chairman M Damodaran on Monday announced the shifting of the Trust's flagship scheme US-64 from administered pricing to net asset value-based pricing from anytime between October to January 1, 2002.

Admitting that internal reasons also contributed to the poor performance of the scheme, he told newspersons in Madras that once the NAV-based pricing was introduced, investors would have the option of redeeming the units at the assured price or trading them at NAV price. The shift would be in keeping with the recommendations of expert committees.

Stating that the poor performance of the scheme was only a temporary setback, he said the scheme would start performing well once the market revived.

Disclosing that the UTI was considering churning up its schemes to see that it has a small number of healthy schemes, he said it was also looking at transferring excess scrips to other mutual fund companies, who have creditable standing. It was also considering sub-dividing funds to other funds.

''Overall, UTI will be reducing its overweight portfolios,'' he added.

On the three-member committee constituted by the Union government to go into the investment decisions of the UTI, he said the committee would only go into one investment decision of the UTI in investing in Cyberspace. "They would not look into the aspect of fall in prices of the UTI schemes as it was a market-related phenomenon.

US-64 is like any other mutual fund and the value of its scrips are determined by the fluctuations in the market, he said.

Stating that only Rs 820 million had been redemeed by small-time investors from July 1 till date, Damodaran said this was a normal figure for any given year.

Announcing that the UTI would be restructured into a more transparent organisation than what it was now, he said the company would set up asset management companies shortly after the UTI Act was amended.

He said that UTI would provide more facilities to investors by including income option to schemes which did not have it previously. Schemes related to sector specific and client specific would also be introduced soon, he added.

Asked whether UTI would dispose off real estate to meet liquidity commitments, Damodaran clarified that there would be no distress sale of real estate or shares. But, the company would be shedding property which it felt was not worth holding on to.

He appealed to investors looking for long-term safety and stability for their investments to keep their faith in US-64, claiming that the scheme had performed relatively better than other mutual fund schemes in a dull market. The scheme had also declared a dividend of 10 per cent for the year ended June 2001, he pointed out.

Quoting financial analysts, he said US-64 still offered a better guaranteed rate of return than fixed income instruments.

Asked whether assuring returns to the investor of US-64 was in a way legitimising the perception that US-64 was an assured income scheme backed by the government, Damodaran said the decision to offer at least something back to the small-time investor was taken considering that most of them had invested their life time savings in the scheme.

UNI

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