MUMBAI, Dec 2: Seven months after the launch of its money market mutual fund, Unit Trust of India has seen the net corpus of the scheme cross the Rs 100-crore mark for the first time last week.

According to sources, the maximum contribution to the fund continues to come from Mumbai. The scheme is currently available for subscription in Ahmedabad, Delhi, Chennai, Bangalore and Hyderabad.

The fund has collected more than Rs 150 crore since its launch on April 23. However, as the fund is being operated as an alternative to short-term fixed deposits in banks, there are regular withdrawals as well, resulting in a lower net figure of Rs 100 crore.

One plus point of the fund corpus reaching Rs 100 crore is that the cost charged to the fund is much lower now. According to UTI estimates, for a fund with a size of Rs 25 crore, the cost charged could be as low as 0.8 per cent per annum, for a fund size of Rs 50 crore, the cost charge will be 0.55 per cent and for a fund of size Rs 100 crore, the cost charge will be 0.50 per cent. And this is much lower than the Sebi stipulated ceiling of three per cent.

The fund continues to outperform short-term bank deposits with the daily compounded annualised return as of November 29 being 9.60 per cent. A study of the returns since launch shows that in the first four months, the daily compounded annualised returns were over 10.5 per cent. Thereafter, the return has come down marginally.

However, UTI officials say that the fund is being sold as an alternative to 1-6 months bank deposits, as it offers much more than the 6-7 per cent that banks provide. This is despite the fact that the MMMF has a minimum lock-in period of 30 days.

The difference here is that unlike bank fixed deposits, monies can be withdrawn without any further lock-in. Besides UTI's MMMF, there are two MMMFs in the market, one from IDBI Mutual Fund and the other from Kothari Pioneer Mutual Fund.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.