You must have heard of opportunities funds, i.e. the ones that invest in stocks from across market segments and sectors in an unrestricted manner. But what's an opportunistic fund house you might wonder?
Well, an opportunistic fund house is typically one that believes in 'going with the flow' and making the most of every 'trend' in the market. More often than not, such a fund house is a follower, rather than a leader. Garnering a sizeable asset base is often its sole objective with scant regard for the investor's interests.
From an investor's perspective, being associated with such a fund house can be a detrimental proposition. This is because the fund house's opportunistic nature is actually an indicator of its non-existent or flawed investment philosophies and policies.
The fund house's opportunistic nature is often exposed in its actions and communication. For example, you might notice that there are fund houses that choose to participate in every trend.
The key word here is 'participate'. It's one thing to have the foresight and vision, and to be the first mover; on the other hand being the perpetual follower is a different ball game altogether. Infrastructure funds are a case in point.
It's odd that several fund houses are busy launching offerings now, at a time when the theme's potential has gained widespread acceptance. Did these fund houses fail to foresee the potential that the infrastructure sector holds earlier?
Then there are instances like new fund offers (NFOs). For example, the tax-planning season is at its peak and expectedly fund houses are busy launching tax-saving fund NFOs.
Nothing wrong with that. But it's odd that some of the tax-saving fund NFOs run over a 3-Mth period, from January until March. The norm for equity NFOs is a month (or thereabouts). Aren't fund houses stretching it a bit too far?
Or is it a good ploy to have a prolonged NFO period coupled with the Rs 10 net asset value carrot dangling to lure investors? We have listed only a couple of instances of opportunistic behaviour from a long list. Such practices certainly don't reflect positively on the fund house.
You might be tempted to say, what's wrong with a fund house being opportunistic? It is a commercial entity and is well within its rights to look after its interests. By all means, we have no reservations on that front. But at what cost and also, is such an approach sustainable? We think not.
We believe that the investor should be the cornerstone of all the fund house's activities. And when the investor's interests are safeguarded, the benefits of the same will be enjoyed by the fund house as well.
Also, playing 'follow the leader' is not a sustainable approach and will hold neither the investor, nor the fund house in good stead over the long-term.
From an investor's perspective, it is vital to be associated with a fund house that has a well-defined investment philosophy and one that adheres to the same at all times. An opportunistic fund house is best given a miss. As regards distinguishing between the two, that's where an investment advisor/financial planner has an important role to play.
Investors bore the brunt of yet another volatile week at the stock markets. The BSE Sensex rose (albeit marginally) by 0.68% and closed at 20,827 points; the S&P CNX Nifty shed 1.18%, before settling at 6,200 points. The CNX Midcap fell by 6.88% and closed at 8,974 points.
Weekly top losers: Open-ended equity funds
| Equity Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | SD | SR |
| ING Dividend Yield | 17.92 | -8.66% | -0.11% | 33.93% | 55.96% | 7.36% | 0.26% |
| Principal Dividend Yield | 23.38 | -8.56% | -2.54% | 32.46% | 49.68% | 7.05% | 0.20% |
| Reliance Pharma | 28.33 | -8.55% | 1.22% | 2.93% | 40.14% | 8.57% | 0.18% |
| Birla Dividend Yield Plus | 62.53 | -8.23% | -0.06% | 27.20% | 47.48% | 6.90% | 0.25% |
| Sundaram Select Midcap | 142.57 | -7.91% | -0.37% | 37.32% | 52.53% | 8.00% | 0.40% |
(Standard Deviation highlights the element of risk associated with the fund. Sharpe Ratio is a measure of the returns offered by the fund vis-à-vis those offered by a risk-free instrument)
Funds of the dividend yield variety (ones that invest in stocks with a high dividend yield) with predominant mid cap holdings featured in the losers' list. ING Dividend Yield (-8.66%) suffered the most, followed by Principal Dividend Yield (-8.56%).
Weekly top performers: Long-term debt funds
| Debt Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | SD | SR |
| ING Gilt | 12.86 | 2.24% | 2.77% | 4.25% | 6.23% | 0.34% | -0.51% |
| Templeton Gsec | 18.05 | 1.96% | 3.96% | 7.49% | 8.78% | 0.92% | 0.03% |
| ICICI Prudential Gilt | 25.12 | 1.92% | 4.03% | 8.26% | 11.18% | 1.02% | 0.20% |
| Reliance Gilt Securities | 14.10 | 1.87% | 3.80% | 7.34% | 10.12% | 1.00% | 0.10% |
| Kotak Gilt Investment | 25.73 | 1.84% | 3.90% | 6.96% | 7.56% | 0.94% | -0.07% |
ING Gilt (2.24%) topped the long-term debt funds segment. Templeton GSec (1.96%) and ICICI Prudential Gilt-Investments (1.92%) came in at second and third positions respectively.
Weekly top losers: Balanced funds
| Balanced Funds | NAV (Rs) | 1-Wk | 1-Mth | 6-Mth | 1-Yr | SD | SR |
| LIC MF Balanced | 72.72 | -5.10% | 0.24% | 51.83% | 60.01% | 7.07% | 0.36% |
| Escorts Balance | 77.37 | -4.47% | 1.49% | 45.10% | 66.15% | 5.56% | 0.47% |
| DSP ML Balanced | 57.27 | -4.15% | 0.58% | 27.82% | 48.56% | 5.07% | 0.45% |
| Magnum Balanced | 33.36 | -3.44% | 0.57% | 14.96% | 29.15% | 5.90% | 0.30% |
| JM Balanced | 33.38 | -3.18% | 1.48% | 23.23% | 43.25% | 5.43% | 0.43% |
Balanced funds were on the receiving end of the volatile stock markets as well. LIC MF Balanced (-5.10%) fell the hardest. Escorts Balance (-4.47%) and DSP ML Balanced (-4.15%) also closed the week in negative terrain.
Speaking of fund houses, it is quite disappointing to note that not all fund houses have taken the 'no load on direct investments' regulation in the right spirit.
One would have thought that fund houses would be rooting for what clearly has the potential to be a pro-investor development. Instead, some fund houses have chosen to circulate newspaper articles that run down the regulation.
Perhaps that's their way of expressing solidarity with the distributor community. Then again maybe we were expecting too much from fund houses. The investor doesn't necessarily feature as an important entity in every fund house's scheme of things.
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