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Tata AMC's Indecisive Management

Tata Mutual Fund has been going back and forth with the investment strategy of its funds. This is bound to impact their long-term performance

Here is one AMC, which has lost precious time in charting its schemes' objectives rather than putting up a stable performance for its investors. Tata Mutual Fund may well be termed the "juggler" of the Indian fund industry. With the AMC's investment strategy for its funds moving back and forth like a pendulum, the fund managers have had little opportunity to build a credible track record. Instead the AMC's investors are often greeted with letters, seeking their consent for change in fundamental attributes of the funds.

For a chronology of slipshod management, consider these:

April, 2001

Tata rechristens its technology fund, Tata IT Sector as Tata Select Sector Fund. Originally launched in 1996 as closed-end Tata Core, this is the second conversion for the fund in less than 18 months. The latest transition has been accompanied by a change in objective, with the fund hopping from ICE portfolio to a diversified equity scheme. Ironically, Tata Select's investment menu is not even a shade different from the original Tata Core Sector Fund. Hence, it is coming a full circle for its beleaguered investors, with meagre gains to their credit. Worse, the NAV is now below par.

September, 2000

The AMC declares a 1:1 rights issue at par in Tata Balanced Fund. However, the mutual fund has to beat a hasty retreat and withdraws the offer. A rights issue does not make sense in an open-end mutual fund, where investors can buy and sell units at will at various NAV levels. Unlike companies, mutual funds do not require fresh capital to improve performance.

December, 1999

Tata Core is converted into Tata IT on the eve of the bull run in technology stocks. One wonders why the new fund is offered in the first place when the AMC is already managing Tata Life Sciences and Technology, which has a predominant technology investment.

December, 1999

The AMC carries out yet another overhaul, with conversions, mergers and change in investment focus. First, Tata Growth Equity Fund is transformed into Tata Balanced. The splitting of Tata Twin Option Fund (launch May 1998) follows this. While the balanced options are merged with Tata Balanced, the equity option is hived off as Tata Pure Equity Fund. One wonders the need for Twin Option Fund when it could barely survive 18 months. Worse, the basket of sectors for Tata Pure Equity clashes with Tata Select Sector now.

Tata Mutual Fund's income fund is also a curious investment. The fund keeps a marginal exposure to equities under all its four options, which gives it a flavour of conservative monthly income plan. While Tata Income's charter permits upto 10% exposure to equities, the fund's name and investment strategy are clearly not in harmony. Income funds today stand for 100% investment in bonds with none of the income funds (barring Tata Income) holding even a single stock in their books.

Surely, the above instances amplify the lack of coherent and clear management at Tata Mutual Fund. The recent change in investment profile points at AMC's attempt to time the market rather than follow a conviction-based strategy in its sectoral funds. Thus, the shift in sectoral preferences has been reduced to a game of roulette.

The AMC has spent more time in experimenting with various products, with launches followed by mergers. The frequent changes have also left investors a confused lot. It is high time the fund house got down to better management of investors' money, which is its real task!