The last couple of months have seen net asset values (NAVs) of mutual fund initial public offerings (IPOs) heading downhill in a hurry. Investors who had invested in these IPOs, particularly tech-related, find these funds struggling just to reach their par values (Rs 10) and returns could prove elusive at least in the short run.

In many ways, mutual funds tech IPOs, mirror the depressing story of equity IPOs. Investors had pumped money in both categories (equity and mutual fund) IPOs hoping to ride the boom in the technology sector. The only difference is that while equity IPOs like HCL Tech, TV-18, Hughes Software opened at several times their issue price, mutual fund tech-IPOs are yet to reach their par values. Surprising as it may sound, mutual fund tech-IPOs have opened at below Rs 10, and with every passing week, investors are seeing their investments erode alarmingly.

Open-ended Tech IPOs	Inception Date	NAV (Rs)	Last week	Last month	Since inception
DSP ML Technology.com	Mar. 2000	8.1	-5.5%	0.0%	-5.5%
Kothari Pioneer Internet Opport. (Gr)	Feb. 2000	7.7	-5.9%	-10.0%	-19.9%
K Tech	Feb. 2000	7.1	-7.1%	0.0%	-9.0%
Sun F & C Emerging Tech. (Gr)	Feb. 2000	6.6	-7.2%	-13.0%	-23.4%
Alliance New Millennium Fund (Gr)	Dec. 1999	7.5	-7.8%	-17.9%	-51.1%
IL&FS eCOM Fund (Gr)	Dec. 1999	5.8	-8.6%	-21.5%	-57.7%
Pru ICICI Tech. Fund (Gr)	Jan. 2000	5.4	-9.0%	-18.8%	-45.5%

As is evident from the above table, the worst hit is Prudential-ICICI Tech. Fund, with its NAV languishing at Rs 5.3. This implies that since its launch in January 2000, an investor who had entered the IPO at Rs 10 has seen his investment fall close to 50% just about 4 months. An equity investor who had entered Infosys, Satyam, Wipro, Global Tele four months ago, would also have seen his investment shaved off by about the same margin.

However, a mutual fund with its diversified investments is supposed to offer a better hedge in a falling market as opposed to investments in pure equities. That hedge is obviously missing in the Prudential-ICICI Tech. Fund IPO. And the more amazing part is that this IPO was one of the largest ones in the mutual fund industry with inflows of over Rs 5 bn! The story with other IPOs is not very different.

So where do we go from here? In an interview to personalfn.com, Mr. S. V. Prasad, President of Zurich India Asset Management Company explained that this is a lesson for mutual fund investors. Investors have learnt (although the hard way) that there is a big difference between hype and reality. So although they are poorer, they are wiser.

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