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All Set Now

With a full range of funds that has many high performers, Tata Mutual looks set for the big time. If it continues to maintain this evolutionary momentum, it could well turn out to be a good single destination for all sorts.

At eight years, Tata Mutual Fund is one of the older private mutual funds in the country. It has also had one of the more tumultuous ownership histories and has now settled down as fully Tata-owned AMC, with its past of JVs with Dresdner and Toronto Dominion (TD) Bank firmly behind it.

Product Changes & Acquisitions
The AMC's product history has also been more eventful than others, with many funds getting modified in one way or another. The Tata Twin Option Fund, which was launched in May 1998 with equity and balanced plans, was split into two separate funds in February 2000. The equity plan was renamed Tata Pure Equity Fund and the balanced plan was merged with Tata Equity Growth Fund, which was renamed Tata Balanced Fund. Tata Select Equity, which was launched in May 1996 as a closed-end core sector fund, was converted into an infotech fund in December 1999, and was run in parallel to the Tata Life Sciences & Tech fund. Then, the same fund became an ethical fund (Tata Select Sector) and finally, in August 2002, it became a diversified equity fund. Also, the AMC has recently carved an MIP out of its income fund. The income fund's mandate already allowed investing a small portion of its assets into equities.

Despite the ownership and fund structure changes, Tata Mutual has gained impressively in size recently and has evolved into a much better-managed fund house. In the past one year, the AMC's total asset base has increased almost four-fold from Rs 582 crore in July 2002 to Rs 2,910 crore in October 2003.

Tata Mutual manages a complete family of funds. Some of its best performing products are Tata MIP, Tata Pure Equity, Tata Liquid and Tata GSF. On the equity side, Tata Mutual Fund has four open-end diversified equity funds. Tata Pure Equity Fund is the best of the lot. Launched in May 1998, it has delivered a total annualised return of 29.75 per cent as on November 5, 2003. This large-cap fund follows a risk control measure of investing only in stocks with market capitalisation of over Rs 500 crore. After the recent rally in healthcare and auto stocks, these two sectors account for one-third of the fund's portfolio. Interestingly, all diversified equity funds of Tata Mutual Fund normally charge an entry load of 2.25 per cent. This is a little higher than other AMCs' usual 2 per cent.

Tata Mutual's tax planner, Tata Tax Saving Fund, has been an above average performer in the category for the past two years. Like many others it went overboard on technology in 2000 and ended up near the category's bottom. Now, it is more diversified, and has been investing mostly in large-caps with some shift towards mid-caps in the last few months. This year it was up 88.75 per cent till November 5. Tata Balanced Fund, an equity-tilted hybrid fund, has always remained in the top-half of the category. It has achieved this by maintaining a disciplined 60:40 equity-debt allocation. While the debt portfolio is largely made up of quality bonds, the equity component is spread over a diversified basket of stocks.

On the debt side, the gilt fund, Tata GSF, has one of the best track records in the category. The fund's one year return of 22.24 per cent is way above the category's 16.42 per cent average. It also has one of the lower expense ratios in the category. The only catch here is the fund's high volatility.

Tata Income Fund, however, has been a below average performer in the category. Though the fund has largely maintained a quality portfolio in recent months, its cautious approach in terms of low average maturity has been the key reason for this. Initially, Tata Income guaranteed an assured return of 15 per cent for the first year. Tata MIP, which has been carved out of the monthly dividend plan of the Tata Income Fund, is going great guns now. The AMC's short-term debt and liquid funds have also been consistent and stable performers. Also, at 0.08 per cent, the expense ratio of Tata Liquid's institutional plan has the lowest expense ratio in the industry.

Tata Mutual is now further enhancing its line-up of products with the launch of a Floating Rate and a Dynamic Debt fund. It also plans to launch a Fund of Funds (FoF). This is a new concept in India, where a fund invests in several other funds having different objectives.

The Way Ahead
Tata Mutual Fund is finally evolving into a well-furnished fund house now. A sharp spurt in asset base and a decent showing by some of its funds provides testimony to this. If it continues to maintain this evolutionary momentum in times to come, it could well turn out to be a good single destination for all sorts.