In a little over one year of existence, ABN AMRO Mutual Fund has done reasonably well. Starting with an initial asset base of Rs 2,148 crore spread over five funds in September 2004, the fund house has chugged along to manage in excess of Rs 2,500 crore now. The market share has also increased from 0.73 per cent to 1.21 per cent in the last one year. Equities contribute over 34 per cent to the total assets.
Going forward, the AMC has some big expansion plans. "We are aiming at launching a range of funds to meet the changing needs of the investors. In addition we are also focussing on providing sub-advisory service to the offshore India equity funds which currently stand at over $100 million. We will shortly apply for the regulatory permission to start PMS business as well. Overall we have quite an ambitious agenda for growing the asset management business in the country," ABN AMRO Asset Management Executive Director Nikhil Johri told Value Research. An equity fund aimed at small and medium businesses and few close-ended funds are also in the pipeline.
Best and Worst Performers
Before we move on to the performance card of ABN AMRO mutual funds, it would be worthwhile to recollect the chronology of fund launches. The AMC started its operations with five funds-an equity fund, monthly income plan, cash fund, floating rate fund, and a debt fund-in September 2004. It added an opportunity fund in March last year, followed by a dividend yield fund, long-term and short-term floaters, cash fund for institutional investors and a tax-planning equity fund in the second half of 2005.
As far as performance is concerned, it has been a mixed bag. A booming equity market has greeted its first equity fund. ABN AMRO Equity has made full use of the opportunity and added a handsome 69.20 per cent since launch till February 14, 2006. In the first full calendar year of existence in 2005, the fund has earned a top-quartile return of 54.38 per cent, as against an average fund's return of 46.64 per cent. A well-diversified large-caps led portfolio spread over 35-40 stocks is on offer here. The fund, though, does not ignore the potential of mid and small-cap stocks completely and maintains a 30 to 40 per cent exposure to them.
The AMC's other equity fund-ABN AMRO Opportunities-too is evolving well. It has gained around 64 per cent since launch. Here too, the stress is on large-cap stocks as far as the capitalisation is concerned. ABN AMRO Dividend Yield fund, which had a successful NFO in August last year, has done reasonably well.
However, all the three funds have generated returns in times favourable to equity investments. Good performance over a period of one year means little for an equity fund. If they carry on the good work in tough periods as well, they would undoubtedly emerge out as one of the most compelling options in the equity funds' category and surely manage much more than what they manage now.
The fund house has run ABN AMRO MIP in a conservative fashion. Though the fund has mandate to invest up to 20 per cent of its assets in equities, exposure has been limited to around 10-12 per cent in the last one year. Consequently, the fund has lagged behind its aggressive peers. Last year, it earned 10.31 per cent, marginally more than 9.40 per cent return of an average peer.
The AMC is still looking for a star performer in its floating rate, cash and debt funds. ABN AMRO Floating Rate Regular has been a laggard. At 0.83 per cent, its expense ratio is much more than an average peer's 0.69 per cent. ABN AMRO Cash Regular fund has similar story. ABN AMRO Flexi Debt fund has disappointed its investors and the fund house as well. Its maturity resembles that of a cash fund on most occasions but the returns are worse than a cash fund. This has triggered redemption in the fund. Currently, it manages a meager Rs 72 crore, much less than its initial corpus of Rs 215 crore.
The Road Ahead
It's too early to form a view on ABN AMRO Mutual Fund. The Rs 2,500 crore that it manages now looks unattractive when seen in light of the huge collections by some of the individual equity funds in the recent times. Things may change from here onwards. The fund house is gearing up to launch some equity funds and it has solid numbers to make a claim that it knows how to manage your money well.