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It is important for an investor to know which funds are in favour and are being invested in. And at the same time, it is equally important for the investor to know which funds lost favour and were redeemed.
So here is a list of the 10 funds that were redeemed the most in 2007. These are the funds that saw the maximum erosion in their assets under management (AUM) relative to their assets at the beginning of the year. Five out of these ten funds already had abysmally small assets to manage and their declining performance over the year didn't help matters.
In absolute terms, the most redeemed mutual fund of 2007 has been Reliance Equity that lost Rs 1,364 crore over the year. This was inspite of the fact that the fund's initial public offering broke all records at that time and was a phenomenal success. Over time, while the fund has stuck to its objective and performed reasonably well, investors' expectations of the fund were not in line with its fundamental attributes. Many mistook it for a regular diversified equity fund and missed the part that a portion of the portfolio would always be hedged. Hence, even though the fund has kept up with the average diversified equity fund's unhedged returns (YTD* 44.14 per cent as against the category average of 48.95 per cent), its efforts have gone unnoticed.
Coming in second is the SBI Bluechip fund. t lost the second largest corpus of Rs 778 crore over the year, i.e. 34 per cent of its assets base. The fund has so far returned only 33.73 per cent as against the average return of 48.95 per cent delivered by diversified equity fund category.
A surprise fund that finds place in this list is ICICI Prudential Discovery. The fund had a fabulous start and delivered chart bursting returns from day one of its operations. However, 2007 has turned sour for the fund and it has had to pay dearly for this underperformance. Here again in the face of a bull rally, where large growth oriented companies have reaped maximum gains, the fund's strategy of investing in value picks (in relation to earnings or book value or dividends) has to a large extent held it back. In line with its value conscious image the fund has 14.42 per cent of assets committed to the much out of favour FMCG companies. But, we won't be surprised to see the fund recovering its lost glory. In fact in case of a meltdown, investors will truly understand the worth of this fund.
While there is nothing contrarian about UTI Contra, the fund has underperformed, in spite of investing in high growth sectors such as energy, financial services and basic and engineering companies. In part, one can attribute this to a loose definition of what a contrarian view is, for the objective states that it will “focus on stocks that are currently undervalued because of emotional & behavioral patterns present in the stock market”. In absolute terms, this fund lost the fourth highest assets, losing Rs 433.6 crore during the year up to November end.
A big part of LICMF Sensex Advantage's woes is that it has found itself committed to technology stocks at 26 per cent of assets. . A 26 per cent weightage at a time when the share of technology companies in the sensex is less than 20 per cent is also quite alarming. The fund has lagged behind its peers in the asset race with a mere Rs 6.58 crore of AUM.
ABN AMRO Future Leaders looks at the mid and small cap space. While the fund's performance has improved, it has clearly found it difficult to win back investor confidence. One of the reasons for this is the fact that the fund was launched in April 2006, just before the crash that extended from May - June 2006. As a result the fund lost as much (-) 33.06 as per cent in just one month between May 15 and June 14, 2006. ABN AMRO Dividend Yield's story is also similar. The fund ended 2006 at the bottom of the category losing (-) 3.20 per cent as against the category's gain of 34.72 per cent. However, 2007 has been much better for the fund, yet the hangover of 2006 looks difficult to overcome.
The two DBS Chola funds have lost Rs 78 crore together. The AMC's efforts to stem asset loss seem to be in vain. The AMC managed to get R Rajagopal as head of equity on board in December 2006. The AMC also has a fairly large research team. It remains to be seen whether the fund house is able to repeat its success with DBS Chola Opportunities for its other equity funds.
Birla Sun Life Buy India's problems stem from the fact that it is caught in the wrong sector at the wrong time. The fund has clearly missed the rally in the capital goods sector, given that its objective is to focus more on the consumer goods and healthcare space.
The only fund that had entered this list in spite of outperforming the category average is Sundaram BNP Paribas Rural India. An AUM erosion of close to Rs 400 crore is what the fund has had to face.
*YTD: Year to date return as of December 18, 2007. Average YTD of diversified equity category is 48.95 per cent.
Disclaimer: This content is for information only and should not be considered investment advice or a recommendation.
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