For the first eight months of the current fiscal, the mutual fund behemoth has seen a net inflow of Rs 3,495 crore, of which closed-ended funds have raked in a whopping 90 per cent or Rs 3,152 crore.

For the rest of the industry, there has been a net outflow of over Rs 820 crore from the closed-ended category with absolutely no fresh inflows in public sector funds. This means that public sector AMCs like SBI, LIC, GIC and Canbank have not launched even a single closed-ended fund in the last seven months.

``Open-end funds have emerged as firm favourites among a large section of investors owing to instant liquidity and exit at a price which is at NAV or at a nominal discount (by way of load) to the NAV,'' says an analyst.

Closed-ended funds have fast lost favour with investors owing to lack of liquidity, especially for those funds which are only listed on the bourses and there is no facility of repurchase by the AMC. ``We have seen how units of listed funds trade at hefty discounts to their respective NAVs. Thus, investors cannot exit at the underlying value of their investment,'' says a fund manager. ``Since investments in closed-ended funds are locked till the time the fund is redeemed, fund managers can go complacent which can affect returns from the fund,'' he adds.

A majority of asset management companies are now concentrating on adding innovative features to their open-ended funds in order to improve returns and service standards and thereby attract fresh investments.

Between April and October, 1999, UTI mobilised a gross investment of Rs 3,787 crore under closed-end funds while there was a redemption of only Rs 635 crore, which means that there have been no large-scale repurchases. On the other hand, the open-end funds saw a healthy inflow of Rs 4,567 crore but it was almost matched by a redemption of Rs 4,224 crore. This lead to an inflow of a mere Rs 343 crore.

The large scale redemption from open-end funds can be attributed to the returns generated by the equity funds of UTI after a long period. ``Most of the equity funds of UTI have been non-performers when they were closed-ended or even after they went open-ended. The current rally boosted their NAVs and gave investors an opportunity to exit from funds like Grandmaster, Mastergain and Masterplus,'' pointed out an analyst.

As far as mobilisation by open-ended funds is concerned, most of the money has flown into funds like US '64, Unit-linked Insurance Plan (ULIP), the open-end bond fund and money-market mutual fund.

As the closed-ended equity funds in the UTI stable go open-ended, they will lose money, especially in a rising market. This is because the trust's record has been poor in managing most of the equity funds. This is where closed-ended funds like monthly income plans are crucial for UTI to get fresh inflows, besides a strong line of new generation open-end schemes like the UTI Bond Fund.