Kothari Prima was the worst performing open-end equity fund in 1997. The fund depreciated by 10.59 per cent and besides Templeton India Growth was the only equity fund to post a negative return in 1997. Prima has depreciated at an annual rate of 17.36 per cent over the past three years.Prima mainly seeks capital appreciation, with modest income generation being a secondary objective. Prima was the first fund in the private sector, after the mutual fund industry was thrown open to private players.
Prima has been a pioneer in setting high service standards and greater transparency. Atleast 60 per cent of the fund assets are to be deployed in equities and upto 40 per cent of the corpus could be invested in debt for stable income.
KN Shiva Subramaniam manages the fund. Launched in October, 1993, Prima was the first to capitalise on the IPO arbitrage opportunity. The strategy was to get firm allotment in IPOs and sell at listing, at a price which was always higher than the offer price. As this strategygenerated a substantial gain of 99 per cent through 1995, Prima totally lost its focus.
It could never achieve the indicated debt exposure, though this was a sharp deviation from the stated objective of investing in debt for stability. After it touched a high of Rs 20.85 within a year of launch, the fund is back at Rs 8.36 in October 1997. As on January 31, the fund has depreciated at an annual rate of 2.57 per cent since its launch. The fund has also faced heavy redemption, which has added to its woes. The corpus of the fund is today down to Rs 15.06 crore from a high of Rs 314 crore in March 1995.
Prima has, however, left its agonising past behind. The fund's portfolio has undergone a complete overhaul over the past year. In the past three months, despite a 15.19 per cent fall in the market, the fund has appreciated by 6.18 per cent.
Today, the fund is invested only in twenty stocks which account for 55.88 per cent of its holdings compared to 281 in March, 1996 which accounted for over 85 per cent ofthe holdings.
The fund has a 14.86 per cent exposure in debt compared to less than 3 per cent in March 1996. Almost 30 per cent of the fund is in money market.
Kothari Pioneer AMC has restructured its three IPO boom-to-bust growth funds over the past one year. Although the 1994 rally is unlikely, Prima should atleast move in tandem with the markets from now on. The fund is available with a 3 per cent entry load.
-- Value Research
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
