Older mutual funds mean better returns?

Tushar Mathur — Mon, 07 Jul 2008 13:36:48 +0000

Keeping an eye on daily finance news and tips, I’ve realized something: of late, many companies have set up mutual fund houses in order to capitalize on India’s booming economy. But do you know which of these were the first to set up shop in India? And how are they doing now?

The Indian mutual fund industry boasts of some of the most popular names of the business world, both Indian as well as foreign. Reliance, ICICI-Prudential, Fidelity and HSBC are some of the leading fund houses offering mutual funds that have yielded stupendous returns. But there are some funds that have a long history of existence.

UTI: Unit Trust of India was the first mutual fund established in India by the Government of India. It offered many guaranteed return schemes that were in vogue during the 1980s and early ‘90s. These schemes invested exclusively in debt instruments that offered high interest in order to generate high returns for investors. The fund started offering equity funds that invested a major part of their corpus in the stock market and stock market instruments. But sadly, all the funds from this fund house have been laggards, partly due to the bureaucratic approach of the fund and partly due to the risk-averseness of the fund manager.

SBI: The State Bank of India, the country’s largest bank, ventured into the mutual fund business by establishing SBI Mutual Fund. It offers many funds such as Magnum Contra, Mangum Taxgain and Magnum Comma. Initially, none of the funds from SBI gave magnificent returns. But then the fund manager changed his approach and revamped his fund offerings. As a result, some of SBI’s funds like Contra and Taxgain became the most popular funds due to their ability to generate high returns.

Franklin Templeton: The story of Franklin Templeton is slightly different. Basically, Franklin Templeton is an American mutual fund house. When it wanted to enter India in 1996, it bought out Kothari Pioneer ITI Mutual Fund that had been in operating since 1994, thus giving it a presence of over 17 years. Franklin has some of the best performing mutual funds in the country — Franklin Taxshield is one of the most consistent tax-saving mutual funds. Besides, Franklin Prima Plus, Prima and Bluechip have brought smiles on the faces of their investors by giving astounding returns. This is the only private sector mutual fund in the country to offer a pension plan, the Templeton India Pension Plan.

HDFC: The Housing Development Finance Corporation marked its entry by taking over Zurich Mutual Fund in 2001. HDFC Equity (previously Zurich India Equity Fund) has been a consistent performer and has outperformed its benchmark index every year. Hence, it finds a place of pride in every investor’s portfolio. HDFC Taxsaver, Long Term Advantage Fund and Top 200 are other funds from this house that have yielded spectacular returns.

Birla: Birla Mutual Fund is the fund house belonging to the Aditya Birla Group. One of its funds, Birla Advantage Fund is the oldest in the country. It gave spectacular returns till 2000. However, it made the mistake of concentrating its portfolio on the IT sector and with the bust of this sector, the fund’s performance deteriorated. Some of its other funds, however, such as Birla Equity Fund, have yielded handsome returns.

Have you invested in any of these funds? Were you happy with the returns generated?

I personally have bought funds from HDFC and SBI and they are doing pretty well.

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Older mutual funds mean better returns?

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