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Spotlight on NAV-based schemes

Mumbai, Aug. 31: Call it intuition or a deep sense of foreboding, the Unit Trust of India (UTI) has been aggressively promoting the sales of its NAV-based schemes, which the mutual fund major is now left with after the government today decided to take direct control of US-64 and other assured return schemes.

In a novel strategy, the Trust started issuing bonuses in select schemes that now find their way into the new entity called UTI-II.

The total corpus of the NAV-based schemes in the UTI-II fold falls between Rs 18,000 crore and Rs 20,000 crore.

The crisis-ridden mutual fund had decided to zero in on four schemes in its portfolio to re-charge its sales. These were the UTI Index funds (both Nifty and BSE Index), the UTI G-Sec fund, the UTI Bond Fund and the Petro Fund. Unlike US-64, its flagship scheme, and the assured return schemes, these funds had historical legacies. In some cases they even outperformed the market.

The four schemes put together have a portfolio size of more than Rs 2,500 crore. The UTI G Sec fund has a corpus size of around Rs 300 crore, while the bond fund has a corpus of Rs 1,300 crore.

“We will try to showcase the achievements of the four funds and promote these funds over others,” UTI officials had said when they short-listed these funds.

Experts say that new UTI-II “comforts the investors” and the fund managers in UTI can “live in peace and concentrate on the new schemes”. Significantly, the UTI-II will still retain its status as the largest mutual fund even after all the MIPs in UTI-I are redeemed.

The mutual fund had launched an advertising campaign to promote the four funds.

The performance of the new generation schemes was in direct contrast to its older schemes. It came at a time when the US-64 and its various MIPs were struggling to find their feet.

Thanks to the re-rating of PSU companies and the volatile interest rate regime, the NAVs of these funds moved northwards.

The main objective of the UTI Bond Fund, launched in May 1998 as an open-end pure debt fund, was to invest in rated corporate debt papers and government securities with relatively low risk and easy liquidity. As an investor-friendly measure, the mutual fund had deferred sales charge applicable under UTI Bond Fund.

The UTI Bond Fund has been ranked one of the top performing funds in the last quarter out of the 35 income funds by a leading dotcom.

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