Live funds set up by the financial whiz kids at IIM Lucknow (IIML) and Management Development Institute (MDI), Gurgaon, for their colleagues and teachers have consistently outperformed the benchmark indices and most Indian funds. IIML’s Credence Capital, with three-month returns of -6.4%, has bettered the Indian MF average of -9.11%. For MDI’s Unnati, the annual return of 20.37% has surpassed the industry mean of 11.78%.

“I like their analytical thinking,” says Deven Choksey of broking firm KRChoksey Securities. “It will be interesting to see how they handle long-term investments in future, which will call for absolute performance in the market unlike the relative approach with short-term money.”

MEET THE PUNTERS

Credence Capital is India’s largest student-run mutual fund. The open-ended fund, with assets under management (AUM) worth Rs 5 lakh, is currently managed by a team of 12, and is divided into three segments: equity, derivatives, and currency. The fund annually garners contributions from around 15% of the student community. The lock-in period is two months, and investment per investor is capped at Rs 50,000 to limit risk.

Unnati started off in 2001 as a diversified fund and a mid-cap option was added in June 2003. The current AUM is close to Rs 16 lakh, with around 600 investors, including alumni and faculty. Unnati has an investment horizon of over a year, and the approach of the 33-member team is more stock-specific than sectoral.

UPBOUND

Both funds have witnessed an exponential rise in the number of investors and assets under management.

Credence also managed to register a spectacular annual growth of 80% in derivatives during the two years of global meltdown before 2009.

The annual returns from Unnati’s diversified fund trumped the Sensex for 2009-10, and subscriptions on the opening day of the 2010-11 academic year totalled Rs 1.5 lakh.

THE FORECAST

Looking ahead, Credence’s fund managers are bullish on sectors such as pharma and infrastructure, given the positive government initiatives in these sectors, but have a low appetite for risk. They are staying away from telecom, particularly in the wake of the recent 2G scandal. The managers also take care not to expand the portfolio to unmanageable levels and advise investors not to get emotional about their one-time favourite scrip.