February 2002
Investors find trust lacking
INDIA
Trust is a scarce commodity these days when it comes to
Indian financial institutions. The Unit Trust of India, the
country's biggest mutual fund, could be in trouble once again. Last
July the government bailed out UTI's biggest fund, US 64, the
second rescue in three years.
UTI's new chairman, M Damodaran, says it could face a shortfall
this year when it must pay investors guaranteed returns. An expert
panel warned last year that in 16 out of 25 guaranteed-return funds
managed by UTI the market value of assets was lower than the
liability of the fund.
By one estimate UTI will have to pay investors up to Rs58 billion,
or 11% of its Rs511 billion ($10.8 billion) assets, this year. Not
much money is coming in from investors. UTI has suffered net
outflows. Assets managed by UTI shrank by a fifth last year, partly
because of a battered equity market....
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