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Creating Trust
UTI was established through a Parliament Act in 1964, to channelise the nation's savings via mutual fund schemes.
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This was done as in the earlier days, raising the capital from markets was very difficult for the companies due to the public being very conservative and risk averse.
By February 2001, UTI was managing funds worth Rs 64,250 crore through over 92 saving schemes such as US-64, Unit Linked Insurance Plan, Monthly Income Plan etc. UTI's distribution network was well spread out with 54 branch offices, 295 district representatives and about 75,000 agents across the country.
The first scheme introduced by UTI was the Unit Scheme-1964, popularly known as US-64...
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Distrust in Trust
Unlike the usual practice for mutual funds, UTI never declared the NAV of US-64 - only the purchase and sale prices for the units were announced.
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Analysts remarked that the practise of not declaring US-64's NAV in the initial years was justified as the scheme was formulated to attract the small investors into capital markets.
The declaration of NAV at that time would not have been advisable, as heavy stock market fluctuations resulting in low NAV figures would have discouraged the investors.
This seemed to have led to a mistaken feeling that the UTI and US-64 were somehow immune to the volatility of the Sensex. Following the heavy redemption wave, it soon became public knowledge that the erosion of US-64's reserves was gradual... |
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