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Phoenix Inspired AMCs Aim at Revival

Rejuvenation likely to be an arduous journey - poor track record, meagre assets and absence of a strong brand are some of the stumbling blocks

It is revival season in the Indian fund industry. Dormant fund managers are getting their act together for a comeback. First, it was Escorts Mutual, which launched as many as four funds in the beginning of 2001. For the AMC, the launch came after a gap of nearly three years. Taurus Mutual also launched its versions of gilt and bond funds, after 1996. And now, BOB Mutual (sponsored by Bank of Baroda) has filed its offer documents with the Securities and Exchange Board of India for a full range of open-end funds -- equity, balanced and income funds.

BoB Mutual currently manages three tax savers and a diversified equity fund -- BoB Growth. With these funds put together, the AMC has an asset base of only Rs 27.47 crore. The last offer from BoB Mutual came in 1997 and the AMC has had a virtually nondescript existence, without capitalising on the strong parent brand.

Grow or Perish:
These funds primarily came into existence not by a strategic design but driven by a strong "me too" of a bank or an NBFC to try their luck in emerging as a financial conglomerate. And after many years of existence, they remain nondescript, with looming risk of extinction, given the largely closed-end assets. For instance, an AMC like BoB Mutual Fund has 3 closed-end funds – once they redeem, the fund house will have to pack up. The only open-end fund in BoB's fold has a corpus of only Rs 2 crore. Anyway, even with open-end funds now, these fund families will take time to break the long spell of inertia and attain the critical asset base to gain respect in the marketplace and consequent viability. And it shows in the stagnant asset base despite new launches - Credit Capital is stuck at Rs 60 crore while Escorts is a few notches above at Rs 75 crore.

Repair is Tougher than Building Afresh:
Despite being around for a while, these funds do not have anything compelling to show except their uninspiring performance and absence of any investment philosophy beyond those statutorily required. It's difficult to find the USP for Taurus the Starshare, BoB Growth or Libra Bond Fund when rivals offer a wide variety with a modest track record and quality service experience as well. Besides, these funds don't have a strong brand to benefit unlike most rivals. In fact, for some, it proves to be liability in an attempt to mobilise fresh investments.

In the absence of any product or service innovation from the new funds, it is proving to be a difficult egg and chicken story in a fiercely competitive marketplace. As to compete with generic products on standard yardstick -- products, performance, service, brand and hygiene issues (transparency, disclosure etc.) will prove difficult when these funds start not from ground zero but by burying the past first to prepare the ground. And the flurry of offering could just be the beginning in that direction!