The Hindu Business Line : JP Morgan launches ‘green’ NFO

Chennai, Jan.1 As the mutual fund market grapples with dampened investor sentiment in a bear market, JP Morgan Asset Management has launched its first “green NFO” — the JP Morgan India Tax Advantage fund — which is a three-year close ended equity linked saving scheme. But even while being an environmentally friendly venture, such an offering helps to cut costs in a tough business environment.

The attempt will be to minimise the use of paper by encouraging prospective investors to download all applicable literature from the Web site and print only as per specific requirement so as to ensure minimum wastage of paper.

Mr Krishnamurthy Vijayan, Executive Chairman of JP Morgan India Asset Management, told Business Line that typically an NFO prints around 25 lakh forms, and the cost of printing and couriering each form is around Rs 2. This would result in a saving of around Rs 50 lakh; the fund house has printed a nominal 1 lakh forms to ensure that it does not violate any SEBI guidelines. “So this is a low paper NFO, and we are surprised at the positive response from the distributor community.” The NFO opened on December 18 and closes on January 16.

Trees saved

On the number of trees that each such NFO, and perhaps even IPOs when they do start re-emerging, can save, he says statistics worked out by his marketing colleague show that every tonne of paper kills one tree. “His rough calculation is that the NFOs in the last one year (each printing an average of 25 lakh forms) would have killed 9,200 trees.”

The tragedy is that the rough return rate of an NFO form is a bare 0.5 per cent, says Mr Vijayan. “In my first NFO at JP Morgan (JP Morgan India Equity fund, April 2007) we printed 35 lakh forms and got 1.3 lakh investors, a less than half per cent return rate! While the objective of all MFs is to address as large an audience as possible, the requirement for paper is exaggerated because of the very low strike rate. If we can, as an industry, reduce this waste, we would be batting for the environment and could use the money saved for more advertising, investor education seminars, etc.”

e-Statements

But even though it is fashionable to talk about the environment, unfortunately very few existing investors opt for e-statements. Mr Vijayan said that JP Morgan has 1.84 lakh investors and despite mailers encouraging them to opt for e-statements, barely 4,000 have chosen this option. To really cut down on paper consumption in sending the mandatory statements to investors, he says, “I wish we could do what countries such as Taiwan, China and Korea allow; giving an incentive to investors for going online… for opening an electronic account we give them various gifts such as MP3 players. People are attracted by such things but in India SEBI doesn’t allow us to give such incentives.”

But wouldn’t this disadvantage rural investors?

“Frankly, how many people beyond the big cities have heard of JP Morgan? They know about UTI and SBI of course… For me to make a start in the existing top market itself is a big thing,” he says.

So would JP Morgan go the “green” way for future NFOs?

“Well, ultimately you’re running a business but based on the response we hope to follow suit in the next four international schemes in the pipeline,” he says.

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