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SBI MF plans to enter UTI turf, to assure returns on entire span
AF Rosemary
MUMBAI, January 20: The SBI Mutual Fund is planning to give Unit Trust of India (UTI) a run for its money in the monthly income scheme segment. The fund is likely to come out with a plan to offer assured returns for the entire life of its forthcoming closed-ended income scheme.Currently, UTI is the only fund in the industry to offer assured returns for the entire life of its monthly income schemes. The managing director of SBI Funds Management, Niamatallah, the investment manager of the mutual fund, told The Financial Express that the scheme is likely to be in the market very shortly, having obtained a clearance from SEBI. The scheme is offering an assurance for the safety of the principal as well. The assurance on the returns front for the entire life of the scheme was not part of the original design. However, according to Niamatullah, when a proper analysis of the possibilities was done, such an assurance did not seem difficult. He feels that since SBI, unlike UTI which collects nearly Rs 1,000
crore in a monthly income scheme, is not likely to net more than Rs 200-300 crore, there should not be any problem in servicing the corpus. "In an income scheme, 80 per cent of the money is locked in debt instruments. The returns on these are known in advance and the risk is therefore covered", he said. He therefore sees no problem in meeting the assurance being promised. Earlier, the fund had plans to offer a return of 12-12.5 per cent. However, a final decision in this regard will be taken in the next couple of days, specially in the light of the recent RBI announcements, signalling a hardening of interest rates. The networth of SBI Funds Management, which will be offering the guarantee, as of March 31, 1997, was Rs 44 crore.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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