In the past few months, fixed maturity plan schemes offered by mutual funds have come under serious scrutiny by investors.

This was attributed to the fact that many of them had invested significantly in commercial papers and bonds of real estate companies and non-banking financial institutions. There were strong rumours that many of these companies were unable to repay the fund houses on time, leading to a rollover of the schemes. This fuelled fears that many schemes would be forced to default.

However, there is more to the FMPs story. Though the fund houses have garnered over Rs 1,50,000 crore (Rs 1,500 billion) from investors, only 8-10 would declare their monthly FMP portfolios till a few months ago. Instead, they gave 'indicative portfolios' and 'indicative returns' to the potential investor.

This month, all fund houses declared the portfolios of their schemes because of the half-yearly results. And, to the horror of many investors, the real portfolios were 80-90 per cent different from the 'indicative portfolios.' 

"When I saw the portfolio, I was completely shocked. Earlier, they had indicated they would invest in certificates of deposits of 10-15 banks, but the real portfolio had CPs of companies, pass through certificates and only a small portion in bank CDs," said an angry high net-worth individual, who recently withdrew a large sum by paying an exit load of 2 per cent.

In the absence of guidelines from the Securities and Exchange Board of India on the difference between 'indicative' and 'real' portfolios, investors do not have any regulatory recourse. However, they are afraid that if 'indicative portfolios' can be so different from real ones, 'indicative returns' may also be different. Last week, Sebi sought data from FMPs to go through their portfolios.

Another reason why many investors are upset is because many FMPs have invested the entire corpus in just a few companies, sometimes just one or two. Though fund managers argue that sometimes the size of the corpus is too small -- just Rs 3-5 crore (Rs 30-50 million) -- to invest in all the companies in the 'indicative portfolio' -- if one goes through portfolios of some of the FMPs, it is a clear case of 'lazy investing.'

For instance, many FMPs have garnered over Rs 20 crore (Rs 200 million), but invested the entire amount in only two or three companies. Worse still, in some cases, the investment is in a single company.

The lack of portfolio diversification is baffling. "I can understand they had invested in papers of real estate and NBFCs because they were giving better returns, but I do not know why they have put their entire corpus in one NBFC or just two banks," said an investment consultant.

It is not just the smaller funds. Many bigger funds too are at fault. A big fund house has several FMPs with single investments.