JM Emerging Leaders Fund Sensex Over Sponsored

JM Financial Mutual Fund is one of India's first private sector mutual funds-integral parts of the first wave that commenced operations in 1993-94. JM Financial Asset Management Private Limited, the Asset Management Company of JM Financial Mutual Fund, is not a part of this joint venture. Sponsored by J.M. Financial and Investment Consultancy Services Pvt. Ltd., and co-sponsored by JM Financial Ltd., JM Financial Asset Management Private Limited started operations in December 1994. The fund house manages assets worth Rs 8075.65 crore at the end of October 2008.
JM Emerging Leaders Fund (G) an open-ended equity scheme launched in June 2005.The objective of the scheme seeks to long-term capital appreciation from investment in a portfolio of stocks across all market capitalization range. The portfolio may include those companies operating in emerging sectors of the economy or companies, which exhibit potential to become leaders of tomorrow. The minimum investment amount is Rs.5000 and in multiples of Rs.1000 thereafter. The unit NAV of the scheme was Rs 3.70 as on 24 November 2008.
The total net assets of the scheme decreased by Rs 158.75 crore to Rs 163.03 crore in October 2008.JM Emerging Leaders Fund (G) took no fresh exposure to any stock in October 2008.
The scheme completely exited from Rajesh Exports by selling 28.85 lakh units (2.54%) and Praj Industries by selling 5.85 lakh units (2.26%) in October 2008.
Sector-wise, the scheme took no fresh exposure to any sector in October 2008.Sector-wise, the scheme had not exited completely from any sector in October 2008.
The scheme had highest exposure to MphasiS with 11.32 lakh units (10.61% of portfolio size) followed by Bartronics India with 15.45 lakh units (8.81%), 3i Infotech with 28.40 lakh units (7.31%) and Sintex Industries with 7.93 lakh units (7.15%) among others in October 2008.
It reduced its exposure to Bombay Rayon Fashions by selling 2.67 lakh units to 7.18 lakh units (by 2.45%), Sintex Industries by selling 2.79 lakh units to 7.93 lakh units (2.30%), Bharati Shipyard by selling 3.87 lakh units to 1.30 lakh units (by 2.29%) among others in October 2008.
Sector-wise, the scheme had highest exposure to Computers - Software - Large at 10.61% (9.61% in September 2008), followed by Trading at 8.81% (7.37%), Computers - Software - Medium / Small at 7.31% (6.10%) and Diversified - Large at 7.15% (9.45%) among others in October 2008.Sector wise, the scheme had reduced exposure Diamond Cutting / Jewellery to 6.16% (by 4.52%), Engineering to 5.21% (by 4.48%), Textiles - Products to 6.79% (by 2.45%) among others in October 2008.The scheme underperformed the category average over all the time periods. It has underperformed the Sensex over all the time periods.
Over three-month period ended as 24 November 2008, the scheme posted negative returns of 14.92% underperforming the category average that posted negative returns of 5.52%. It underperformed the Sensex that posted negative returns of 5.01% during the same period.
Since inception, the scheme posted negative returns of 77.76% underperforming the negative category average of 50.69%.

Mutuality Concerns of Mutual Funds

The regulations that govern the operations of mutual funds in India are about to undergo some significant changes. This was inevitable, considering the nature of the crisis that the industry has undergone. While the exact nature of the changes are not yet decided, the underlying theme will be that of protecting and enhancing the 'mutuality' of mutual funds. What exactly is this 'mutuality'? This is a concept that investors and - even fund professionals - do not recognize explicitly. However, it lies at the heart of the very concept of a mutual fund.
The principle is that all investors in a fund must be equal partners in it. There are two sides to this. One, the fund company must treat all of them equally. And two - and this one is harder to achieve in practice - funds must be run in such a manner that the actions of one investor can not harm another.
The crisis that funds faced over the last few weeks appears at first sight to be about funds being unable to make redemptions when asked for because of the credit crisis. However, at a more fundamental level, the problem was that of a massive breakdown of the mutuality of the funds. When some investors show up to ask for early redemptions in the midst of a massive credit freeze, then the only way to meet their demands was to sell of the more sellable investments at whatever desperate price they would fetch. In a crisis, it's always the better investments that are more sellable. Were this to be done, then the some investors-the early redeemers-would walk away with some of the returns that actually belong to the ones who stayed on.
This time around, the extraordinary and global nature of the crisis meant that the government made special, once-in-a-lifetime arrangements to enable funds to make redemptions without having to sell off investments at fire-sale prices. The government arranged for bridge loans that enabled funds to make redemptions and yet delay sale of investments. However, in more normal circumstances, many things can happen that lead to similar situations.
One of the solutions that have been proposed is the strict isolation of corporate and individual investors. The idea is that the two kinds of investors should not invest in the same funds-fund companies should run corporate and retail versions of the same funds. This is in fact already done in some funds although in those the motive seems more to protect corporates from the high cost of servicing individuals rather than to protect individuals from the adverse affect of corporate's sudden redemptions.
In principle, the idea of isolating the two kinds of investors is a sound one. The mutuality of mutual funds is easier to maintain if there is reasonable similarity in the nature and motives of investors. However, in practice there is a limit to how much such isolation can be achieved. There are plenty of differences of scale and goals even among corporates and individuals for this not to be a perfect solution. In fact, such issues have come up in the past too. As a result, there was a rule made a few years ago that no fund could have less than twenty investors or have more than a quarter of its assets from a single investor.
The main concern in all of the above is that when some investors redeem their money, then quick sales lead to the portfolio getting degraded. The ideal thrust of the new regulations should be to make sure that investors' investment and redemption cycles should reflect the actual liquidity of the underlying assets. If there's a mismatch between the two, then all the rules in the world will not prevent a breakdown of mutuality.

Source: http://valueresearchonline.com/story/h2_storyview.asp?str=12273

MFs can't take it anymore, cut staff to cope with funds strain

Large-scale redemptions across schemes and strained finances in the past couple of months are forcing mutual funds in India to cut employee costs as part of their attempts to survive in testing times. While the smaller funds by assets under management (AUM), who are fighting for just survival, have already resorted to such measures, industry officials say it’s just a question of time before the larger ones follow suit, unless financial markets stabilise.
According to people familiar with the matter, Fidelity Mutual Fund and Edelweiss Asset Management Company have asked a few of their employees to leave the firms. Fidelity, with AUM worth Rs 6,484 crore as on October 31 that forms 1.5% of the Indian mutual fund industry’s total managed assets of Rs 431,901 crore, is believed to have laid off at least three officials in its research department.
In response to an ET query on this matter, a Fidelity spokesperson confirmed the development, saying: “In common with all financial services companies, we too are affected by falling and volatile stock market levels, adverse investor sentiment and the economic slowdown. This has meant that we have had to reduce our costs and adapt our business to the new environment.
We have been reviewing all our costs and having taken up opportunities to cut cost in all other areas, we have regrettably had to reduce staff costs as well. We can confirm that three analysts have been let go, however, our team of investment professionals remains one of the largest in the local market.”

Edelweiss AMC, a new entrant to India’s competitive mutual fund industry, is also learnt to have opted this measure to trim costs. The entity, which managed assets worth Rs 228 crore as on October 31, has asked a few of its staff, including a top official in the institutional sales department, to resign.
An Edelweiss spokesperson responded to an ET query, saying: “As per regular process, performance reviews are conducted on a quarterly basis in order to maximise organisational culture & employee profile fit in keeping with the organisations’ overall goals and requirements. There have been no mass layoffs.”
Similarly, some of the other newcomers in the domestic mutual fund industry, including a couple that were criticised in the industry for their exorbitant marketing expenses at the time of their launch, are also looking at options to cut costs. Mirae Asset Global Investments India, which saw its assets fall by 56% in October, has cut salaries of its employees in its latest yearly review.
“We have rationalised salaries in line with the industry. This has been around 30% on an average,” said Mirae CEO Arindam Ghosh, adding that there have been no layoffs from the organisation, contrary to industry speculation that the fund has retrenched employees.
The situation is in stark contrast to the situation a few months ago when mutual funds were absorbing retrenchments in the financial services sector, mainly broking companies. But, with huge redemptions in most schemes in the past couple of months, amid a bear market in equities and tighter money supply situation, many firms in the industry have been left with little options. If business conditions deteriorate, jobs at larger mutual funds would also be in jeopardy, industry officials said.
“The situation is grim and even we would have to cut jobs to sustain ourselves,” said a top official at one of India’s top five mutual funds.

Source:http://economictimes.indiatimes.com/Personal_Finance/Mutual_Funds/MF_News/MFs_cant_take_it_anymore_cut_staff_to_cope_with_funds_strain/articleshow/msid-3753115,curpg-2.cms