The annual report for investors has details about JM Equity Fund, JM Balanced Fund, JM Liquid Fund and JM Debt Fund for the year ended March 1998. This report, however, does not contain details about JM Basic Fund -- the largest scheme in the JM stable.

Importantly, JM Basic Fund, a petrochemical-specific fund, has invested 90 per cent of its entire corpus in a single company -- Reliance Industries. JM Mutual Fund officials are tightlipped about the portfolio of the balanced fund. Constant requests for obtaining the portfolio were turned down. The reason for for the same is not far to seek. However, from documents made available with The Financial Express throws lighton some interesting facts.

As on March 31, 1998, the portfolio of JM Balance Fund had a heavy exposure to Reliance group. The scheme had a corpus of Rs 539.28 crore, of which 94.7 per cent was ploughed in Reliance group.

It is noticed that the scheme held 26.84 million shares worth Rs 469.74 crore at that point in time in Reliance Industries. The scheme also has exposure in triple option convertible debentures of Reliance Petroleum to the extent of 5.5 million debentures and non-convertible debentures (NCDs) of three million in Reliance Industries. Collectively, the entire exposure to the group comes to Rs 510.87 crore. However, such investments are aligned with Sebi guidelines for sector-specific schemes.

A year-and-a-half ago, the Sebi had strict guidelines regarding the extent of investments made by schemes in any particular company. According to sources in the industry, a scheme could not invest more than 15 per cent of its corpus in any single company. These guidelines are now redundant. Mutualfunds are now free to invest any amount in any particular company.

This defeats the primary purpose of mutual funds -- providing steady returns to small investors and reducing risk by holding a diversified portfolio. Nor is this a stray instance.