'Indicative Returns For Mfs Is A Step Forward'

Business Standard: What is your opinion of the Sebi decision on indicative returns?

U R Bhatt: It is definitely a step forward. However, the modalities of indicative returns have to be looked into closely. These schemes, would have to mention in their offer documents and advertisements that the returns are based on the current yields of instruments which may change from time to time depending on the interest rates prevailing in the market, the RBI policy and other relevant factors.

More importantly, it has to be clearly mentioned that these returns are purely indicative in nature and the investor is not assured of any specific returns. Also, in case a portfolio of securities is made public, it would also have to be mentioned that such a portfolio is a hypothetical example and the scheme does not assure that the same portfolio will be maintained.

 

Therefore, there are adequate checks to prevent schemes from misusing the advantage of indicative returns.

But, on the other hand one has to examine to what extent schemes would be benefitting in terms of garnering funds from the investing public by advertising indicative returns. It is common knowledge that there is a growing market for regular and fixed income products, be it in the form of bonds or corporate debentures, or even fixed deposit schemes.

At present, the yields of financial institutions and corporate debt are much more than what an average mutual fund scheme offers. So it is to be seen whether advertising indicative returns by mutual fund schemes would prove to be a greater competitive edge over their competitors, specially in a restricted environment.

BS: What are your plans for Jardine Fleming's operations in India?

URB: Jardine Fleming has come to India with a long-term horizon and will do everything to provide world class service to its investors. Jardine Fleming, till date, has only come out with one scheme - a close-ended tax saving scheme in 1996.

The scheme has done quite well in view of the depressing stock market conditions and as of January 24, the scheme's NAV is Rs 10.17. It must be remembered that the scheme had started with a NAV of RS 9.40 (and not Rs 10 like many of the present mutual fund schemes). Jardine Fleming will come out with a minimum number of two schemes during the calendar year 1997