Mutual funds have tried just about everything to lure investors and sell their schemes. They have tried foreign funds, contra funds, sector funds when a particular sector is doing well and many other tricks. Instead of coming up with innovative ways of investing, some fund houses have been innovative at the most superficial level—the naming of schemes. Most fund houses have an ‘equity fund’, a ‘large-cap fund’, ‘small-cap fund’ or a ‘mid-cap fund’. Some of these come with permutations and combinations of ‘India’, ‘growth’, ‘value’ or ‘opportunity’ so then you have an ‘equity opportunity fund’ or a ‘India growth fund’. Some use fancy acronyms, as bizarre as an AGILE Fund or even an SMILE Fund. There is a ‘TIGER’ Fund and there was a ‘CUB’ Fund as well. Of course, fund houses would like their schemes to stand out—some have even ‘succeeded’ in doing so, not only by their hotshot name but by sheer underperformance as well.

Why the fancy names? Most of these mutual fund schemes were launched in the bull market period between 2005 and 2009. Looking to lure investors, they probably came up with such weird names to make the schemes look different from others. Investors hear about something like a Hi Fi Fund and think it’s different. In fact it’s not; it’s the same thing, under a fancy name. Some may feel they have a different objective; but, they invest in almost the same set of stocks. Is there a correlation between fund performance and the fund name, given that the name was most likely conjured up to hard-sell?
 
A few years ago, we did an analytical piece on fancy fund names and their performance (“Fancy Funds, Average Returns”, Moneylife, 3 December 2009). Some of those schemes still exist; a few have been merged with other schemes, to hide their underperformance. JM Hi Fi Fund, UTI Variable Investments Scheme, DBS Chola Global Advantage Fund, SBI One India Fund and ING CUB (Competitive Upcoming Businesses) Fund have all been merged into other schemes. BNP Paribas later decided to rename their Future Leaders Fund to a more modest BNP Paribas Mid Cap Fund.

When a scheme adopts a fancy name, investors would not have a clear picture of its investment objective or the kind of risks it will take on. When you hear of an SBI Magnum COMMA Fund or a DWS Alpha Equity Fund or a Sahara REAL Fund, would you have any idea of the scheme’s investment objective? The history of schemes with odd names suggests that investors seldom get what they pay for.