Mumbai, July 8: The Unit Trust of India (UTI) seems to be facing a tough time in hooking investors to its overseas funds. The initial offer of the India Debt Fund has finally closed, after being open for an extended period of one week.

On closing day, July 2, the fund had received subscriptions to the tune of $33 million only. UTI officials however said that fresh sales will continue till the upper end of the target collection amount- $150 million is reached. Unfortunately for the trust, the fund was floated at a time when the interest rates in India were falling. So the initial offer was rather difficult to sell.

UTI sources said that while several investors were interested in the Indian debt market, they preferred to take the cautious route of waiting for a while to see how well the fund was going to lock the monies received. In fact, the offer period had been extended in the hope that more investors would come in.

In fact, even the current amount of $33 million is only the committed amount. The monies have yet to really flow into the coffers of the fund and is expected to come in by July 14-15. The subscriptions are said to have come from a widespread of investors. The 10-year open-ended fund which opened for subscription on June 12 has an initial lock-in period of three years.

So UTI has no fear of redemptions till then. Meanwhile, with the stock market booming, UTI has stepped up marketing efforts to sell the India Access Fund, its overseas index fund.

India Access which was floated in February this year has seen a very small jump in its corpus to $53 million from the $30 million garnered during the initial offer. This is despite the fact that the tracking error of the fund has improved to a positive nine basis points, indicating an outperformance of the Nifty index that it is tracking.

UTI officials expect a better inflow if there is a renewed marketing effort. SBC Warburg which had lead managed the initial offer has been asked to do just that.

Commercial Union with whom UTI has entered into a strategic alliance for managing and marketing the fund will also play a part in the renewed marketing. "The fund is performing so embarassingily well that our investors are asking us whether we have started actively managing the fund", said a UTI official. However, it remains to be seen whether UTI can really hook investors to their equity offering.

It may be mentioned that UTI was forced to take the decision of winding up the Columbus Fund, another overseas equity fund, last week, as there were no interested parties. The corpus of the fund had depleted to $1.2 million at the time of winding up, from the $25 million at float.

The administrator of the fund- the Mauritius based International Financial Services will distribute the proceeds of the sale of assets to the remaining investors.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.