Uti Bailout : Does Anybody Gain?

It's really no big deal. The bailout of India's largest mutual fund, Unit Trust of India, should not have come as a surprise to anyone. UTI is a government-owned institution, and the government's decision to make good the shortall in UTI's assured return schemes and Unit Scheme 64 is simply a case of the government doing what it was supposed to do. Period.

Having said that, the measures announced by the government to address the so-called larger issues ailing UTI, will do more harm than good. The breaking up of the mammoth fund into two comes as a shock. Size matters in the mutual fund industry and by splitting the fund, the government appears to have splintered the biggest advantage that UTI had. Also, the package does not hint at anything being done to prevent UTI from indulging in distress sales.

No gains for investors: Schemes in which assurances were not extended for the entire term of the scheme, as in case of some of the Monthly Income Plans and Institutional Investors' Special Fund Unit Schemes (a series assured return scheme for big- ticket investors), the dividend is to be reset periodically, depending on the earnings capacity of the scheme.

What the bailout has done really, is squashed all speculation