The mutual fund industry ended 2006 with a bang, lots of NFOs were floated and lots of money came in.

AK Sridhar, Chief Investment Officer of UTI Mutual Fund estimates that funds that were launched in the first half of last year, more or less up to 85-90% must have got invested. And maybe the funds that were launched in the last two months must be having a fairly larger proportion of cash, he says.

Sridhar not only discusses the MF performance last year, but also gives an outlook for 2007.

Excerpts from CNBC-TV18's exclusive interview with AK Sridhar:

Q: You have launched two new schemes and hope to mop up Rs 1,500 crore. Is that on target?

A: It's too early to predict the target now, we launched it only a week back. There are two funds; Capital Protection Fund and Long Term Advantage Fund. We will know what kind of money we will be mobilizing in maybe the next two weeks.

Q: What’s the level of money that’s being held by the industry because we believe that a lot of new money came in at the end of last year? Give us an idea what you have been gathering and how much is still with the funds?

A: According to my estimation, funds that were launched in the first half of last year, more or less up to 85-90% must have gotten invested. And maybe the funds that were launched in the last two months must be having a fairly larger proportion of cash. Otherwise I see the cash level to the extent of 8-10%.
 
Q: What is the kind of response that you are seeing being generated for these new fund offerings, particularly the two which you have rolled out?

A: The Capital Protection Fund is an altogether new concept in terms of the product. It's rated by AAA (SO) rated and a three-year and five-year plan, which we have launched. The scheme is launched and its getting over on 25 January and anyone who wants to invest has to come only during the initial offer period and it is completely closed for three years and five years as the case may be.

I think it’s a good alternate to a banking deposit. It’s an ideal product for people who have been traditionally investing only in bank deposits. It's for the risk adverse investors, who, at this point of time, do not want a downside, but also try to capture the reasonable amount of an upside.

So I think it’s a product well-suited for people who have traditionally been going to banks and also who are a little skeptical about investing in the equity market at this point of time.

Q: How do you gauge the response of both these new funds because they are still in the open period?

A: I think the Capital Protection Fund is picking up very well. In fact, it has been received in the B&C class cities extremely well. It's difficult to make a judgment on the large cities, maybe it will take about a week’s time to judge the response. But the overall reception has been very good because of the capital protection that it offers.

Q: Are you also looking at a shift in interest towards investment in debt instruments because your Capital Protection Fund is really a hybrid offering with exception to your Long Term Advantage Fund, which is an equity offering? Do you see an interest being generated or a shift really happening towards debt instruments?

A: The shift could happen in the first quarter of the next year and pure debt fund or blend fund could possibly start mobilizing money. But I think at this point of time, even investing in debt fund is fairly an attractive proposition. In fact, if you look at a three-five year horizon, even that could give a much better return.

Q: What’s the general reaction of investors when you open the fund at these levels of the Sensex? Are investors cautious of coming in? And for existing investors, do they look for redemptions at this point of time or do they stick on?

A: In the last two months, inspite of the market moving up, every fund has mobilized a large amount of money. Considering that, I think the interest is quite good as of today. We expect it to attract the interest of the investors especially of those who are hooked on to the bank deposits.

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