Close-ended MFs catch fund managers fancy

Mumbai, Jan 31 | Updated: Feb 1 2006, 05:30am hrs
It looks like close-ended mutual fund schemes are making a comeback after staying away from the limelight for a fairly long time. After Tata MF launched the Tax Advantage Fund-1 in mid-January, its now the turn of Prudential ICICI MF, who has launched their Fusion Fund to attract long-term investors. In fact, this is the fourth close-ended scheme to go on stream in the recent past. December 2005 was also witness to the launch of two close-ended equity schemes. First came Smaller Companies Fund from Franklin Templeton, followed by the Long Term Equity Fund by HDFC.

Incidentally, experts are of the view that a close-ended scheme gives more leeway to the fund manager who need not worry about the daily cash flows. Dhirendra Kumar, managing director, Value Research, says: There are pros and cons attached to every type of scheme and the same goes for close-ended ones. While the fund manager may not have to maintain cash flows on a daily basis, investors have to settle for lower liquidity. In a similar context, Pankaj Razdan, MD, Prudential ICICI Asset Management Company Ltd, says: In an open-ended scheme, the investor has the tendency for trading. He may opt out of the scheme in the short run. Analysis has proved that if an investor stays invested for a longer horizon, then he can surely make money.