Mutual fund IPOs have done very well in the last year and a half, garnering record subscriptions.

Investors have been flocking to buy units, hoping to gain from the current rally.

Add to this is the popular perception that a par value purchase improves the chances of getting better returns. Experience shows this may or may not be true.

So is it time for some introspection? It is, believe a clutch of mutual fund managers and distributors.

The refrain among them is that small investors must be more prudent while investing in IPOs and should look at the track record of the fund house too rather than just the "at par" units.

Smita Vermani, assistant vice president at IDBI Capital Market Services, said, "The buoyancy in the equity market has attracted many small investors, especially from the smaller cities and towns. IPOs are particularly attractive because of the positioning and the perceived benefits of owning units at par."

To draw the bees, some mutual funds have also launched IPOs with no front-end load.

No wonder, therefore, that while almost every IPO of the recent past has attracted a large number of investors, some of the existing schemes with impressive track records struggle to attract new money.

Hemant Rustagi, chief executive officer at Mumbai-based consultant Wiseinvest Advisors, explained: "Investors must have compelling reasons to go for a mutual fund IPO -- such as investing in a particular segment of the market, investing in instruments that they can't invest in directly due to lack of knowledge or funds. Or, if such an investment will help them in improving the overall returns on their existing portfolio."

He says one should invest in IPOs that fill the gap in individual portfolios or widen the investment universe.

The point to be noted is, a mutual fund launches new schemes to complete its range of offerings -- that is, to suit the requirements of different investors and investment horizons.

"Therefore, every new product launched may not suit your requirements and hence you need to analyse the features properly and then take a decision to invest or not to invest," says Rustagi A point to be noted, additionally, is that such an approach leads to putting money only in one asset class, which could be a risky strategy.

J Rajagopalan, managing director at Mumbai-based Bluechip Corporate Investments, offers a thumb rule: look at your investment needs before going for a mutual fund IPO.

"Clearly, there is a need for investors to rethink their strategies on investing in mutual funds," Rustagi cautions.

So remember...

An IPO marks only the beginning of a scheme -- that's the only reason why units are sold at par value.

Growth in the schemes's net asset value will depend upon the quality of the portfolio held by the scheme, its exposure to various industries and segments and the strategy of the fund manager.

Therefore, the logic that investing in an IPO guarantees success has the potential to boomerang.

Besides, if you don't fully digest the features of the scheme, the risks of over exposure to a particular asset class increases.