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What is in a Fund Name?

What's in a name? As the famous bard of Avon said, obviously unaware that some three centuries later Indian mutual funds would trip over themselves changing their names to reflect truer or better pictures of themselves.

What's in a name? As the famous bard of Avon said, obviously unaware that some three centuries later Indian mutual funds would trip over themselves changing their names to reflect truer or better pictures of themselves.

To give the devil his due (no puns intended), a mutual fund is a consumer product as well, therefore, it has to be branded and eventually sold. And right name is crucial. The naming and marketing of funds also depends on how they are sold.

Many funds have changed their names in recent times - to be precise 24 individual funds, and asset management companies have not been far behind. Five of them underwent the re-namkaran ceremony. Reasons behind the makeover ranged from a change in management, a local or a global takeover and a new partner.

Pioneer ITI was Kothari Pioneer till recently, 20th Century and ITC Threadneedle Funds are now Zurich Funds, IDBI Principal was only IDBI Mutual before the U.S.- based Principal group took a 50 percent stake in the fund promoted by country's largest development financial institution. Grindlays was ANZ Grindlays before merger of the parents in India.

Onto funds now. Not only did the Birla AMC take over two funds from the now closed Apple AMC, but also rechristened them to reflect a newer investment theme. Thus Apple Goldshare became Birla MNC, and Apple Platinum morphed into Birla IT. It was a win-win game for all parties involved. Birla AMC saved on time with a ready made vehicle having all regulatory approvals in place, Apple was able to offload its liability and investors were benefited through a better and a savvier fund manager having global linkages.

But does anyone really care, as long as it makes money? If you find investors who have made money in the past year on equity mutual funds, please let us know, but to get back to more serious things, what if you've bought into a fund with performance expectations based on the fund's name and descriptive material? Then you see your expectations crumble because the information you relied on didn't tell the whole story about the true nature of the fund.

We suggest that investors always look beyond a fund's name to avoid nasty surprises. As blind belief in a fancy name, like GIC Fortune '94, Dhansamriddhi and Dhanvikas, Ind Shelter and Ind Taxshield has proved hazardous.

Dhansamriddhi, for instance, implies wealth creation, but the scheme's performance has been anything but that. The fund's NAV stands at an abysmal 1.98 rupees per unit. On a year-to-date basis, the fund has posted a negative 34.65 percent return till July, in sync with its miserable performance since its launch in August 1994. So investors have been led to a merry chase.

However, there are valid reasons for a name change. A better description of the product ranks the first. Six funds in the past have metamorphosed into newer entities. Whether a name change may have resulted in better performance is debatable, but it certainly helps attract the right set of investors into the fund. Let's go through the following instances -- the name JM Liquid Fund suggests it is a cash fund whereas it was a medium term debt fund hence the name has been changed to JM Income Fund. Similarly the name Alliance Liquid Income was not clear enough whether it was a cash fund or a debt fund. Hence the change in name to Alliance Income Fund. In an endeavor to present the right investment policy of its scheme Multiplier Scheme '90, the parent SBI Mutual Fund changed it to Magnum Equity. Similarly Magnum Open-end was renamed to Magnum Balanced. This would have surely helped the investors understand the fund better. Through such moves the Asset Management Companies are trying to communicate with the investors the underlying investment policies for the respective funds.