Changes in name, merging of schemes are just a few things marking the losing relevance of contra funds…
28-Mar-2013 •Research Desk
Contra funds are losing. In 1999, SBI Contra was the first fund to be launched in the category. The category hit its peak in August 2007, with the launch of JM Contra, resulting in eight schemes in this category. However, in the past two years the number of contra funds has gone down to just three (See: Playing Contra). Kotak Contra is now Kotak Classic Equity, L&T Contra converted to L&T India Value, JM Contra was merged into JM Multi Strategy, ING Contra was merged with ING Dividend Yield and in January 2013, Tata Contra was merged into Tata Equity Opportunities.
The market mentality is such that when the equity markets are on the rise, investors join the bandwagon to whatever is the mood of the market. It is only when the markets reverse the direction that fund managers look at minimising the losses. The contrarian investing strategy is adopted by which fund managers follow a completely different tactic to the existing market conditions.
Says R Srinivasan, fund manager, SBI Mutual Funds, “Magnum Contra is a diversified multi-cap fund where we try to run a contra bias not only at appropriate times but also when the conviction on such a stock is strong enough for it to be in any other fund.” For investors, the lure of contra is wearing off given the state of the markets. At the same time, fund managers are unable to get the right contra bets that stand out compared to a broad diversified equity fund, leading to the natural death of these funds.