Lackluster performance of child schemes by mutual funds and aggressive push from insurance child plans are responsible for the slow take off of schemes targeted at children by mutual fund houses
Mumbai: The mutual fund industry is rushing to launch goal based products to strike a chord in investors’ hearts. However, uninspiring performance of such schemes has dissuaded financial planners and investors. Also, there has never been a sustained effort to sell these funds on an ongoing basis. As a consequence, child schemes from mutual funds have not been able to garner enough money from investors.
“It’s a good innovation but the objective of the scheme has to be backed by performance. At the end of the day what matters to investors is good performance which in this case has not been inspiring. The nomenclature is not so important. Even an equity diversified fund could be a good investment avenue,” says Amar Pandit, CEO, My Financial Advisor.
|
Scheme Name |
3 Years(as on 25 March 11) |
5 Years (as on 25 March 11) |
Since Inception |
|
HDFC Children's Gift - Investment |
17.96 |
11.90 |
15.02 |
|
UTI CCP Advantage(G) |
11.93 |
8.70 |
7.00 |
|
HDFC Children's Gift - Savings |
11.18 |
8.70 |
8.29 |
|
ICICI Pru Child Care Plan-Study Plan |
10.25 |
9.47 |
11.78 |
|
Templeton India Children's Asset-Gift(G) |
9.76 |
10.79 |
12.08 |
|
ICICI Pru Child Care Plan-Gift Plan |
7.38 |
7.20 |
18.80 |
|
SBI Magnum Children Benefit |
7.35 |
7.14 |
9.15 |
|
Templeton India Children's Asset-Educ(G) |
5.84 |
6.79 |
9.53 |
|
LICMF Children(G) |
-6.22 |
-5.88 |
0.21 |
|
Source : Accord Fintech | |||
Child focused plans are managing Rs 3587 crore as on March 26, 2011.
Among the oldest in this category is Templeton Children’s Asset Plan. Investors get to choose from three options based on their goals and risk appetite. For instance, dividends are locked in for a period of four years under the Education Plan. Withdrawals are allowed only till the child attains 18 years of age.
These schemes are generally meant to build a nest egg for children by having a long tenure of lock in period. Depending on the option chosen by the investor, the scheme parks money in a combination of equity and debt instruments.
Fidelity Mutual Fund and Peerless Mutual Fund are the recent players to launch child focused funds.
Fidelity India Children’s Plan offers Education, Saving and Marriage options. Similarly, Peerless Mutual Fund’s hybrid new fund offer, Peerless Child Plan invests in a mixture of equity, debt and gold ETFs.
Launched in 1993, UTI’s UTI-Children's Career Balanced Plan has been among the rare successful scheme and claims to have 15 lakh folios.
|
Scheme Name |
NFO Open Date |
Total AUM (Cr.) |
|
UTI CC Balanced |
12-Jul-93 |
2924 |
|
Templeton India Children's Asset-Educ(G) |
22-Apr-98 |
1 |
|
Templeton India Children's Asset-Gift(D) |
22-Apr-98 |
1 |
|
Templeton India Children's Asset-Gift(G) |
22-Apr-98 |
6 |
|
HDFC Children's Gift - Investment |
25-Jan-01 |
278 |
|
HDFC Children's Gift - Savings |
25-Jan-01 |
63 |
|
ICICI Pru Child Care Plan-Gift Plan |
16-Jul-01 |
183 |
|
ICICI Pru Child Care Plan-Study Plan |
16-Jul-01 |
34 |
|
LICMF Children(G) |
26-Sep-01 |
6 |
|
SBI Magnum Children Benefit |
28-Dec-01 |
23 |
|
UTI CCP Advantage(D) |
19-Jan-04 |
5 |
|
UTI CCP Advantage(G) |
19-Jan-04 |
63 |
|
Fidelity India Children's Plan |
17-Jan-11 |
NA |
|
Peerless MF Child Plan |
11-Mar-11 |
NA |
|
Source : Accord Fintech | ||
Insurance firm, on the other hand, have a lion’s share in child focused schemes as they have a higher budget to market such schemes as compared to mutual funds. The regulator has put a cap of 2.50 per cent within which a fund has to manage its expenses while the expenses in a typical child plan offered by insurance firm can range 5 per cent to 6 per cent.
“Insurance firms are mis-selling children’s plans. A child doesn’t need insurance. The charges are also high compared to mutual funds. Moreover, insurance firms have an advantage as they have a higher penetration and offer good incentives for their distributors,” says a senior official with a leading fund house.
