Deutsche India unit launches govt securities fund

The Indian fund unit of Deutsche Bank sad on Wednesday it has launched a fixed income fund that will invest in government securities as it sees them coming to favour on expectation of softer interest rates.

DWS Gilt Fund, which would invest in an actively managed portfolio of government securities, joins India's 31 gilt funds that managed about 20 billion rupees at the end of August, data from the Association of Mutual Funds in India showed.

"With investors turning extremely risk-averse, we believe that this is an opportune time to invest in gilts," said Suresh Soni, chief executive Officer of Deutsche Asset Management.

"The possible return of a softer interest rates regime and single-digit inflation scenario can lead to a positive momentum in gilts," Soni, who also heads the investment team, added.

Between 2001 and 2003, such securities yielded an annualised return of 19.8 percent as a result of softening interest rates and relatively lower inflation, the firm said in a statement.

With the near-term expectation of slowing inflation and a softer interest rates regime setting in, gilts are expected to once again gain popularity, it added.

The benchmark 10-year bond yield fell to 7.94 percent on Wednesday after central banks around the world cut rates in a coordinated move to shore up the global economy.

Source: http://uk.reuters.com/article/fundsNews/idUKLNE49802B20081009

After FMPs, liquid funds under fire

After turning up heat on fixed maturity plans, big investors like banks and treasuries of companies are training their guns on liquid
funds. These funds, 
which are like current accounts for these bulge-bracket investors, have been facing increasing redemptions in the past few days. 

Although most fund managers attribute this to the tightening of the liquidity in the system, investors say apprehensions over the quality of the portfolios has also played a major part. 

Liquid funds form the biggest component of the total assets with the mutual funds industry with more than a third of the total assets parked with these funds. This testifies to their popularity among big investors like corporates and high net worth individuals for parking their investible surpluses. 

But after the recent turmoil in global financial markets, these sophisticated investors have been gripped with fears about the safety of their invested capital. Besides, funds leaving the system on account of the advance tax payments and quarter ending transactions have made money even dearer. 

“While there have been no defaults in the system as such, there is concern on the credit quality of assets (on the debt funds side) in certain investor quarters,” said Akhilesh Singh, business head, wealth management & distribution, Emkay Global, a domestic broking house that sells mutual funds. “It’s not about the return on money, but the return of the money.” 

Many other distributors said the crisis in the credit derivatives market globally has made investors fearful of pass through certificates (PTC) that form an important part of these liquid funds. As per industry estimates, PTCs form some 15-20% of the total assets in liquid funds. PTCs are created by banks, by breaking into pieces loans they have given to companies or individuals and then sold them to investors. 

These PTCs envisage that cash flow from the underlying asset classes would be passed through to the holders of the securities. 

But in case the company or individuals are unable to repay their loans, then the securities become worthless. Investors are especially wary because in recent times, MFs have been heavily investing in paper made from loans given to real estate companies to spruce up their returns. 

But fund officials like Suresh Soni, who heads Deutsche AMC, said the concern over PTCs is not justified at all. Mr Soni added that loans given to single companies — single loan PTCs — carry the same risk as a debenture issued by a company. 

As for those PTCs which are created from loans given to individuals — pool PTCs — he said several loan takers would have to default for the portfolio to take a hit. 

As for redemptions from liquid funds, Mr Soni said liquid funds are meant to be products that can handle huge occasional outflows from funds. “Quality of portfolios of Indian funds is also adequate,” he added, dismissing any suggestions of weakness in certain MF portfolios.

Source: http://economictimes.indiatimes.com/articleshow/msid-3575343,prtpage-1.cms

Equity Fund with three unique Features

For the first time ever in the Indian Mutual Fund Industry, three unique features are part of Equity fund from Bharti AXA Investment Managers.

1. Daily SIP
2. Quarterly Dividend Option
3. ECO Plan

The Bharti AXA Equity fund is a diversified equity scheme with the objective of generating long-term capital appreciation from a diversified portfolio of predominantly equity and equity-related securities including equity derivatives.

Value of funds' holdings of ICICI seen down sharply

Indian funds may have seen the value of their combined holdings in ICICI Bank drop by around 21 billion rupees ($430 million) in six weeks, based on their holdings at the end of August and the fall in the bank's share price since.

Shares in ICICI fell as much as 28 percent on Friday before ending down 19.7 percent, taking their 2008 losses to over 70 percent, as investors dumped the stock on concerns about its potential exposure to the global financial crisis.

More than 200 mutual funds collectively held about 68 million shares or 6.14 percent of India's top private sector bank at the end of August, making it their third most-preferred holding, data from Reuters and fund tracker ICRA showed.

ICICI Bank shares have fallen 46 percent since the end of August. Updated figures on funds' holdings as at end-September are due next week.

ICICI Bank is the most preferred banking stock of the Indian mutual fund industry, the August data shows. The collective holdings of funds rose more than 60 percent in the first eight months of 2008.

Forty funds had invested more than 5 percent of their assets in ICICI Bank at the end of August, up from 32 at the start of the year, data showed.


FUNDS' INTEREST IN ICICI BANK