Assets managed by value funds likely to increase in 5 years

Mutual funds which follow the "value investment" philosophy comprise merely five per cent of total equity assets under management at present as compared to the USA's 45 per cent mark.
Mutual fund houses said that this level would rise with increasing awareness among investors, though they also said that more awareness would be needed to make value investment mutual funds popular.
ICICI Prudential Asset Management Company, Birla Sun Life Asset Management Company and UTI Mutual Fund are three major mutual fund houses which run value investment mutual fund schemes.
"I see 20 per cent of funds become value funds in five years because the investor's experience with value funds is very good and value as a concept is growing at present," ICICI Prudential Asset Management Company Managing Director and Chief Executive Officer Nimesh Shah told PTI.

Under value fund schemes, investors invest where they felt that the intrinsic value of the business is much more than the price at which the business is available.
Ten years ago, ICICI Prudential Asset Management Company, the second largest mutual fund house in the country with assets under management of approximately Rs 1.40 lakh crore launched a fund which follows the philosophy of value investing. The asset size of the Value Discovery Fund is more than Rs 7,000 crore.

"We have been managing a fund which follows the value investment philosophy for the past ten years. Since its inception, the Value Discovery Fund has given a 25.44 per cent CAGR more than the 18.41 per cent posted by its industry benchmark," Shah said.

"The scheme is open to investors, but they would have to stay invested for a minimum of three to five years to benefit," he said.
Talking about other value funds launched by his company, he said, "In November 2013, we launched Value Fund Series-I which is a three-years close-ended fund, followed by the launch of Series-II, III and IV. Across various closed ended schemes launched since then, our fund garnered around Rs 2,300 crore".
He said that value funds have given better returns as compared to Systemic Investment Plans (SIP) and other category of funds during the past ten years.

He said that the UTI Mutual Fund-run Dividend Yield Fund which falls under the category of a value fund, has outperformed the benchmark. Yet, the company favoured creating more awareness about value funds, to make them popular among investors, he said.
"People prefer market capitalisation funds (like mid-cap funds), since understanding of growth funds versus value funds is not high among investors yet. Hence we have to create more awareness," UTI Asset Management Company Group President for Sales and Marketing, Suraj Kaeley said.