If you?re a UTI Mutual Fund investor, then here?s some really good news for you. No, there isn’t some windfall coming your way from the fund company, the good news is on its managerial aspects. However, on a more relative note, the good news can be considered to be some sort of a windfall. Last week, T. Rowe Price bought 26 per cent stake in UTI Mutual Fund. Now, this isn’t just another merger that we keep reading about almost every day. This merger is a landmark; it is significant on many levels and is most certainly good news of people who have invested in UTI funds.
T. Rowe Price is an American mutual fund company. A pure fund management company, T. Rowe Price, unlike other foreign companies, and like UTI, is solely a mutual fund company, without interests in other businesses like banking and insurance. T. Rowe Price manages assets worth around 300 billion US dollars and has also come out largely unaffected from the recent crises. This makes it a good fit for UTI.
But don?t for a moment assume that UTI needs the support of a foreign firm. UTI Mutual Fund, since its inception in 2002, has done a really good job by itself, which was largely unexpected. As a descendant of the Unit Trust of India, a special undertaking was carved in 2002 to run UTI Mutual Fund. The government required promoters to for UTI Mutual Fund to be an asset management company and it asked four public sector entities ? Bank of Baroda, Life Insurance Corporation, State Bank of India and Punjab National Bank ? to play that role. Of course, these four entities just went through the motions while the Government managed the company. Now, their stake has been reduced to 18% each, with T. Rowe Price in charge.
This merger will be good for both the investors and the government. Back in 2002, it seemed like the government would be footing the bill to run UTI Mutual Fund. But thankfully, the general time at the bourses and in the economy was good and the entire deal turned out to be profitable for the government. UTI Mutual Fund managed to become a professional, competent fund company. To the surprise of almost everyone, UTI didn?t end up like Air India or BSNL ? sad stories of companies that were once dominant public sector outfits but who couldn?t weather competition in open markets. In terms of market share, UTI is currently fourth with 10% share. It also stands second in terms of profitability in the equity funds segment. These are impressive achievements, especially for a government-managed company.
Now, with T. Rowe Price in charge of UTI Mutual Fund, its standing can only get better. However, like with all things related to mutual funds, this news should be taken with a hint of caution as well. You don?t need to run out and get invested in UTI funds, first wait and see how T. Rowe Price?s presence affects the fund company. After all, quite often, what we have expected hasn?t really happened.
Author is CEO of Value Research