Trusts, charities discover solace in mutual funds

MUMBAI: It is not just retail investors who are convinced about the power of the mutual fund (MF) as a vehicle of long-term wealth creation; many charitable organisations and trusts too seem to think so. According to industry sources, these groups have been steadily increasing their exposure to equities through mutual funds.

There are many religious and non-religious trusts out there which are deploying 60-80% of their long-term funds in equity schemes, fund industry experts say.

Swaminarayan Trust, Ahmedabad, Gujarat Cancer Society, Ramkrishna Mission, Tirumala Tirupati Devasthanam, Missionaries of Charity, Ram Janambhoomi Nyas, Ayodhya, Dyal Singh College Trust, Charities Aid Foundation India, Environment Support Group, Shwetambar Trust, International Centre for Entrepreneurship and Career Development, Birla Kalyan Nidhi Trust, Hindustan Charity Trust and Bombay Hospital Trust are some of the more prominent trusts which have been investing in mutual funds.



���Many charities have surplus funds not needed to fund their immediate charitable activities; often, the trustees invest some or all of this surplus in order to generate extra income to fund future activities,��� says the distribution head of a fund house that claims to have a handful of trust-focussed mutual fund schemes.

As per Indian Trust laws, religious organisations, charitable trusts, Wakf boards and registered societies are allowed to invest in mutual funds.

Non-profit organisations are generally allowed to park their liquid assets in scheduled banks, public securities and trust-approved mutual funds ��� most mutual fund plans are trust-approved schemes. Investment in shares of private companies is strictly prohibited. Trust boards are not very keen to take direct exposure into equities, as such investments are classified as ���high-risk investments��� by the Charity Commissioner in India.

���Almost all major organisations are investing in mutual funds now. These boards generally take a very conservative approach as they are dealing with public money. Many trust boards invest in mutual funds which offer the systematic investment plans,��� says Jaishankar Maharaj of The Ramakrishna Mission.

Until some time ago, trust boards parked their funds exclusively in bank fixed deposits. As the boards got savvier and corpuses increased, boards��� investment exposure expanded to PSU bonds, G-Secs and long-term commercial papers.

���The trend of investing into mutual funds is more of a natural progression. Even though these are non-profit organisations, trust boards always show inclination to optimise their portfolio yields. By investing in mutual funds, these boards crave for simple 12-15% annualised returns. The investment profile of charity organisations is very similar to pension funds,��� adds Bajaj Capital managing director Rajiv Bajaj.

SKP Securities��� managing director Naresh Pachisia echoes his views: ���Much like corporates, there are many trusts that invest in short-term liquid funds and FMPs as well. They are very comfortable investing pure equity and balanced funds as well. Some funds even have 100% of their long-term corpus in equity mutual funds. Hindu religious trusts, Christian NGOs, trusts managed by corporate houses and educational trusts are very savvy with their investments,��� Mr Pachisia explains.