Leading open-ended diversified equity funds
| Diversified Equity Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | SD | SR |
| Sundaram Select Focus | 57.91 | 6.20% | 9.86% | 4.01% | 74.21% | 6.95% | 0.45% |
| Sundaram India Leadership | 28.69 | 5.26% | 9.09% | -1.06% | 59.80% | 6.99% | 0.48% |
| Sundaram Growth | 65.17 | 5.21% | 7.51% | 0.88% | 65.27% | 6.80% | 0.42% |
| ABN AMRO Equity Opp. | 18.56 | 3.45% | 4.96% | -3.25% | 51.00% | 7.01% | 0.44% |
| ABN AMRO Future Leaders | 9.43 | 3.15% | 6.75% | -5.71% | - | 10.81% | -0.13% |
(The Sharpe Ratio is a measure of the returns offered by the fund vis-à-vis those offered by a risk-free instrument) (Standard deviation highlights the element of risk associated with the fund.)
The diversified equity funds segment threw up an interesting picture with schemes from just two fund houses i.e. Sundaram BNP Paribas Mutual Fund and ABN AMRO Mutual Fund dominating proceedings. Sundaram Select Focus (6.20%) surfaced as the top performer followed by Sundaram India Leadership (5.26%). ABN AMRO Equity Opportunities (3.45%) and ABN AMRO Future Leaders (3.15%) also featured in the top performers' list.
A striking observation made during our interaction with investors, is that most investors rarely set financial goals or objectives. Instead, the investment activity is carried out in an aimless and rather haphazard manner. The trouble with this investment style is that investors never quite know where they are headed or what they will achieve. It's a bit like setting out on a journey without a destination.
Identify your financial goals at the outset
On the contrary, if investors conduct their investment activity in the right manner i.e. by setting tangible financial goals at the outset, it eliminates any semblance of ambiguity. By having concrete goals like planning for retirement, providing for children's education or even setting aside money for contingencies, investors know what they have set out to achieve. Each objective is backed by a unique set of investments that are catered to achieve the goal. For example, a portfolio which is meant to provide for retirement would typically be long-term in nature; similarly, liquidity would be the defining factor for investments which are meant to provide for emergencies.
Leading open-ended long-term debt funds
| Debt Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | SD | SR |
| Templeton Inc. Builder | 24.67 | 0.20% | 0.65% | 2.36% | 2.85% | 0.39% | -0.63% |
| Deutsche Premier Bond | 12.07 | 0.20% | 0.81% | 2.59% | 2.75% | 0.66% | -0.21% |
| ING Income | 17.90 | 0.17% | 0.38% | 2.16% | 3.49% | 0.26% | -0.82% |
| Reliance Income | 22.91 | 0.16% | 0.67% | 3.48% | 5.32% | 0.29% | -0.24% |
| Sundaram Bond Saver | 22.49 | 0.16% | 0.43% | 2.52% | 3.34% | 0.25% | -1.02% |
The 10-Yr 7.59% GOI yield closed at 7.60% (October 27, 2006), 6 basis points below the previous weekly close. Bond yields and prices are inversely related with falling yields translating into higher prices and net asset value (NAV) for debt fund investors.
Templeton Income Builder (0.20%) and Deutsche Premier Bond (0.20%) shared the top position in the long-term debt funds segment. ING Income (0.17%) came in at second position.
Leading open-ended balanced funds
| Balanced Funds | NAV (Rs) | 1-Wk | 1-Mth | 1-Yr | 3-Yr | SD | SR |
| Sundaram Balanced | 31.72 | 3.41% | 7.66% | 37.95% | 28.89% | 4.25% | 0.37% |
| Birla Balance | 27.01 | 3.05% | 4.29% | 34.98% | 28.26% | 4.01% | 0.40% |
| JM Balanced | 21.85 | 2.53% | 5.25% | 51.74% | 29.12% | 4.99% | 0.42% |
| BOB Balanced | 22.83 | 2.47% | 4.63% | 27.19% | 31.63% | 6.06% | 0.32% |
| Birla Sun Life 95 | 169.04 | 2.45% | 5.04% | 39.04% | 35.73% | 4.76% | 0.46% |
Sundaram Balanced (3.41%) topped the balanced funds segment. Birla Balance (3.05%) and JM Balanced (2.53%) occupied second and third positions respectively.
Speaking of setting goals and achieving them, there are a set of "players" who are quite adept at this "game" i.e. asset management companies (AMCs) and mutual fund distributors. It is not entirely uncommon for AMCs to conduct contests for mutual fund distributors, encouraging them to rake in the maximum number of systematic investment plans (SIPs) in return for prizes like foreign trips and cash rewards among others. Some might say that there is nothing wrong with such an arrangement, as it can only lead to infusion of competitiveness among distributors. However the trouble is that such contests can have an adverse impact on investors.
Welcome to the mutual fund contest
An over-enthusiastic distributor, driven by the urge to make the most of a contest, could well get his client invested in schemes contrary to the latter's need or risk profile. Instead of acting in the investor's interest (i.e. aiding the investor in achieving his financial goals), the distributor might work towards achieving his personal goals i.e. attaining rewards offered by the contest. For the distributor, if the trade-off lies between achieving the investor's goals vis-à-vis his personal goals, there's a fair chance that he might be tempted to choose the latter over the former.
Given that the remuneration earned by both the distributor (in the form of commission) and the AMC (in the form of fund management fees) is linked to the asset size, mutual fund contests are likely to remain a permanent feature of the industry. This puts investors in a rather unenviable position.
Investors on their part need to be more aware while making an investment decision. They should not hesitate to question their investment advisor's recommendations and actively participate in the investment process, thereby making informed decisions. This is their best bet at ensuring that they don't become unwitting participants in a contest where they might emerge as losers in the final analysis.
For a Free download of the latest issue of Money Simplified - Midcaps: What's the real story?, click here!
