Mutual funds see 2009 as year of active money management

Every equity scheme from every fund house took a beating in 2008; fund managers hope new year will be better

India’s mutual fund managers, after waging a losing battle through all of 2008, are hoping they can recoup some losses in 2009. “We look forward to 2009. It is the year where we’ll have to make amends for the past and the stage is set for the same,” insists Nilesh Shah, deputy managing director of ICICI Prudential Asset Management Co. Ltd, the third largest Indian mutual fund house by assets, managing about Rs37,055 crore at the end of November.

Equity funds in India followed the stock market’s dive even as investors rushed to cash out of their fixed income or debt funds in the months of September and October.Mutual fund assets under management shrank by more than 25% over the year, from Rs5.49 trillion at the beginning, to Rs4.05 trillion as on 30 November, the last date for which data is available. “In 2008, both regulators and fund managers failed in predicting the depth of the economic crisis. While they were talking about globalisation, in the same breath, they were also talking about decoupling,” said Shah. “It was an unprecedented year in terms of how things unfolded, and we are not going to see this kind of a year in the next 10-15 years,” predicts Sandip Sabharwal, chief investment officer (equity) at JM Financial Asset Management Pvt. Ltd, which managed Rs6,749 crore in fund assets at end-November, about half the Rs12,480 crore it was managing at the end of December 2007. Equity diversified funds as a category dropped 56.68% during the year, in line with the 54% fall in the Sensex, India’s most watched index on the Bombay Stock Exchange. Given that 2008 saw every equity scheme from every fund house take a beating, fund managers are desperately seeking to save face in 2009. Shah of ICICI Prudential likens 2009 to 2003, when stock markets rebounded for a five- year rally after being in the doldrums for three following the bursting of the dotcom bubble and 9/11. “2009 starts off negative, with most economies in the world slipping into negative growth, but I feel it will be a very different end,” claims JM Financial’s Sabharwal, betting that credit flows will restart, interest rates will fall further, and there will be no prolonged slowdown.During 2008, when active management failed, the ideal strategy that would have worked, said Sabharawal, was passive management of funds that tracked a key index, keeping a large chunk of the fund in cash. But he predicts that “It (2009) is going to be a year of active management with some very specific picks emerging in industries and sectors that will lead the climb up.”On the debt funds front, thanks largely to an easing in monetary policy by the Reserve Bank of India, mutual fund schemes have already started posting positive returns. As interest rates fall, the price of the paper in which these debt funds invest go up, effectively boosting the net asset value of the schemes. Data from Value Research India Pvt. Ltd, which tracks performance of mutual fund schemes, show that income, gilt and, liquid and liquid-plus schemes—the three broad classes of debt funds—have posted year-to-date returns of 11.93%, 21.44% and 8.55%, respectively. Such returns have likely made up for the crisis of confidence and erosion in value of these funds in late September and early October, resulting in net redemptions of at least Rs90,000 crore over those two months. The Securities and Exchange Board of India, which regulates mutual funds, has also chipped in to boost confidence, announcing earlier this month that it will not allow redemptions from close-ended schemes over the tenure of the scheme. It also said all new closed-ended funds should be listed on stock exchanges to provide liquidity to any investor who may want to sell in a financial emergency. But the bottomline for success in 2009 is consistency, says Krishnamurthy Vijayan, chief executive officer of JPMorgan Asset Management India Pvt . Ltd. “There should be consistent selling,” says Vijayan. “If fund houses were making 20 sales call a day in a good market, they need to do the same in a bad market. If they had one advertisement a week in a good market, they need to have at least one a fortnight now. If they talked about them being a process-driven fund house earlier, they need to do that now too.”

Source: http://www.livemint.com/2008/12/29223723/Mutual-funds-see-2009-as-year.html

Birla Sun Life adds new features to Tax Relief 96

BSL Tax Relief’96 with this novel feature, helps the investors avail of critical illness insurance of upto Rs. 10 Lac, till the age of 55 yrs against 9 critical illnesses.

Birla Sun Life Mutual Fund has added a new feature to one of its most consistently performing fund “Birla Sun Life Tax Relief’ 96”, by offering customers a unique critical illness insurance for 9 critical illnesses. The revised equity linked tax saving scheme opened on December 15, 2008. The fund aims to deliver value to the investors through long-term capital growth from a diversified portfolio of predominantly equity related securities.
BSL Tax Relief’96 with this novel feature, helps the investors avail of critical illness insurance of upto Rs. 10 Lac, till the age of 55 yrs against 9 critical illnesses.
Commenting on the launch of BSL Tax Relief’ 96 Fund with added feature,Anil Kumar, CEO, Birla Sun Life Asset Management Company Ltd, said, “Birla Sun Life Tax Relief’ 96 Fund is designed keeping in mind the requirements of investors. The fund will take care of their three financial planning priorities – tax management, wealth creation and their health needs with insurance for critical illness.”
Birla Sun Life Tax Relief’ 96 Fund offer investors the opportunity to save tax under section 80C, avail special critical illness insurance and also reap benefits of capital growth by investing in the world’s third best equity fund, as rated by Lipper. The scheme has till date declared an impressive 2160 % dividend since inception.

Every equity scheme from every fund house took a beating in 2008; fund managers hope new year will be better

The stock market downturn, beginning early in 2008, wiped off close to Rs150,000 cr this year, bringing its asset size to nearly Rs4,00,000 cr

They used to be an avenue of mutual gains for investors in both good and bad times for years, but incurred heavy losses in 2008, when mutual funds (MFs) became poorer by about Rs150,000 crore or about one-third of their total size.Such has been the impact of these losses, which accounted for nearly three-fourths of the overall gains in the previous year 2007.The mutual fund industry in India, with nearly 36 members, was regarded as a safe avenue of mutual gains for investors till 2007, when their total wealth grew by more than Rs230,000 crore to Rs550,000 crore.However, the stock market downturn, beginning early in 2008, wiped off close to Rs150,000 crore this year, bringing its asset size to nearly Rs4,00,000 crore and leaving the industry shattered with a huge liquidity crunch.But the industry, where players operate with catchlines like “We believe 2009 will be a better year and the mutual fund industry would bounce back with general improvement in liquidity and economy as government measures would promote growth, while the overall market sentiment is likely to change from January onwards,” Association of Mutual Funds chairman A P Kurien said.Mutual funds are likely to resume growing in a robust manner by April-June 2009 as equity markets are expected to improve by then, Kurien said, adding that the Rs20,000 crore support given by the government helped in avoiding a crisis situation for the industry.“We started the year on a extremely optimistic note and are ending it on an extremely pessimistic edge. It has been the worst calendar year for the market as the magnitude of losses have been huge,” mutual fund tracking firm ValueResearch Online CEO Dhirendra Kumar said.However, the weak close to the year could provide an excellent ground for rebuilding “as this is the appropriate time for investors to buy for the long term”, he added.Market regulator Sebi has issued guidelines to protect mutual funds and investors from sudden redemptions, like asking funds to list close-ended schemes and disallowing exit from schemes before maturity.The decision came in the wake of a liquidity crisis faced by the industry two months ago as investors pulled out from fixed-income funds fearing a liquidity crunch.Probably on account of this, the industry saw new fund houses entering or planning to enter the space this year. These included Bharti AXA, Edelweiss Mutual Fund, India Infoline, Religare, Aegon and Peerless.

Banks, insurers, MFs may soon manage your pension

The Pension Fund Regulatory and Development Authority (PFRDA) on Friday sought applications from entities wishing to float pension funds to manage retirement assets of all Indian citizens, other than government employees already covered under the existing pension scheme.
Indian banks, insurance companies and mutual funds will soon have the opportunity to manage pension funds. The Pension Fund Regulatory and Development Authority (PFRDA) on Friday sought applications from entities wishing to float pension funds to manage retirement assets of all Indian citizens, other than government employees already covered under the existing pension scheme.
Detailed criteria set out by PFRDA in its primary information memorandum (PIM) entitle government institutions, banks, insurance companies and mutual funds to sponsor a pension fund. One important criterion is that the sponsor must have at least five years of experience in running debt and equity funds and should have managed average monthly assets of Rs 8,000 crore for 12 months ended November 30, 2008.
“Insurance companies, being the only manager of long-term finance, are perhaps best suited to manage pension funds. We are very keen to participate in pension fund management,” said Puneet Nanda, chief investment officer, ICICI Prudential Life Insurance. Among private life insurers only a couple of companies, besides ICICI Pru, may be eligible given the requirement of minimum funds under management of Rs 8,000 crore. Among mutual funds, the number would be higher.
Joint ventures are eligible to apply. The selected sponsors shall be required to incorporate the pension fund as a separate company.
The selected sponsors shall be required to incorporate the pension fund as a separate company in which direct or indirect foreign investment should not exceed 26% of the paid-up share capital, according to the information memorandum on the regulator's website. Existing PFs regulated by the PFRDA are also eligible.
The details seem to indicate that the pension regulator has potentially opened the doors to several entities within a group. There are several financial conglomerates with a mutual fund, insurance and banking entity. If these entities meet the eligibility criteria of minimum funds under management and experience, each can apply separately.
Reliance Capital, which owns Reliance Mutual Fund and Reliance Life Insurance, is keen on applying through both companies, said Sam Ghosh, managing director, Reliance Capital. However, given the requirement of minimum funds under management of Rs 8,000 crore, the application is likely to be through the asset management company.
State-owned banks are also interested in the pension fund business. Many state-owned banks also have a mutual fund joint venture. Union Bank of India's chairman MV Nair said the bank is interested in managing pension funds. “A high-level team of the bank would go through the information memorandum issued by PFRDA before taking a decision on whether to apply,” Mr Nair said. The newly-incorporated pension fund management company must have a minimum net worth of Rs 10 crore.
The entry of private fund managers will enable all citizens, even those in the unorganised sector, to invest their retirement funds, however small, in assets of their choice - equity, debt or balanced. They will also have the freedom to shift their portfolio across licensed fund managers.
So far, the PFRDA has licensed pension funds sponsored by the State Bank of India, Life Insurance Corporation and Unit Trust of India to manage funds collected under the new pension scheme for government employees. These three existing pension fund managers will also be eligible to apply to manage retirement funds for individuals other than government employees. The PFRDA runs the new pension scheme which covers those who have joined central services excluding armed forces and some state services since January 1, 2004.
The seeking of expression of interest sets the stage for the second part of pension reforms. In the first stage, three pension funds promoted by SBI, LIC and UTI were given permission to manage the government's new pension scheme. In the second stage, individuals other than government employees will be allowed to invest in PFRDA-regulated funds.
Unlike in the case of mutual fund or insurance, the asset management company will play no role in marketing and distribution of products and will manage only bulk funds allocated to it. Individuals will open accounts through a central registering authority - a job undertaken by NSDL. The PFRDA plans to employ point of purchase outlets and these would include banks, post offices and perhaps insurance companies to distribute its products.
Those keen on applying will have to submit the EOI along with a request for qualification. The RFQ has to include the companies annual report for the past five years and information on corporate profile, reasons for interest in pension funds, and organisation and ownership structure of the sponsor. Once the eligible candidates are short-listed, they will be invited to submit their technical and financial proposals to sponsor a pension fund.
Source: http://www.indiainfoline.com/mf/innernews.asp?storyId=88506&lmn=7

UTI MF to divest 26% stake by March: report

Japan-based Shinsei, with which the fund house has tie-up with regard to global fund management, is being actively considered to be the strategic partner.
UTI Asset Management Company reportedly mulls offloading 26% stake to a strategic partner in the next three months. The negotiation is at the advance stage and the deal is expected to be closed by February or early March.
The report stated that Japan-based Shinsei, with which the fund house has tie-up with regard to global fund management, is being actively considered to be the strategic partner. Other US and European players, including the second largest fund house in the US America Vanguard Mutual Fund, have also shown interest in picking up strategic stake in the mutual fund, which has seen growth in its asset under management even when the sector is facing redemption pressure.
UTI Mutual Fund is promoted by State Bank of India, Punjab National Bank, Bank of Baroda and Life Insurance Corporation holding 25% each.

Source: http://www.indiainfoline.com/mf/innernews.asp?storyId=88561&lmn=7

SBI MF announces change in key personnel

SBI Mutual Fund has announced change in key personnel effective from 12 December 2008. Navneet Munot has been appointed Chief Investment Officer. Navneet Munot, 38 has done his M.com, C.A., C.F.A., and C.A.I.A. He has over 14 years of experience in the area of financial services. He has joined from Morgan Stanley Investment Management where he worked as executive director responsible for Multi-Strategy Funds. Before that he worked with Birla Sun Life AMC as CIO - Fixed Income and Hybrid Funds. He also worked with Birla Global Finance and Birla Sun Life Securities.

JPMorgan India Tax Advantage Fund floats on

JP Morgan Mutual Fund has begins initial offer period of JPMorgan India Tax Advantage Fund from 18 December 2008 till 16 January 2009. The Fund is an open-ended tax advantage fund.
The objective of the scheme is to generate income and long-term capital growth from a diversified portfolio of mainly equity and equity-related securities. Redemption of units can be made only after a period of three years (lock-in period) from the date of allotment of Units proposed to be redeemed as prescribed in the ELSS.

conversion of JM EnD Fund to JMNiftyPlus

Accordingly the following changes are proposed in JM Equity & Derivative Fund w.e.f. 2nd February, 2009
a) Change of name of the scheme to: JM Nifty Plus Fund
b) Change of investment objective of the Scheme
The Investment objective of the scheme will be to generate investment returns by predominantly investing in S & P CNX Nifty Stocks and Nifty and its 50 constituents in the same weightages as its composition and through deployment of surplus cash in debt and money market instruments and derivative instruments.
Consequent to the above change in the investment objective of the Scheme, the scheme will undergo a change from an income oriented interval scheme to an open ended equity scheme and will be subject to the provisions of Equity Scheme.

After conversion of the scheme to an Equity Scheme i.e on or after 3rd February, 2009
Investors are requested to indicate their preference while investing in the Scheme. In case an investor fails to specify his preference, he shall be deemed to have opted to select the Growth Option.
Dividend Option shall offer investors the facilities of : (a) Dividend Payout and (b) Dividend Reinvestment. Under dividend reinvestment, dividends declared will be reinvested into the Plan / Scheme. In case, an investor fails to specify his/her sub-option preference under dividend option, he/she shall be deemed to have opted to select the dividend reinvestment option. However, in case the dividend payable to any unit holder is below Rs. 100/-, then the same will be automatically reinvested.
Systematic Investment Plans (SIP)/ Systematic Transfer Plans (STP)/ Systematic Withdrawal Plans (SWP)
The existing requests for SIP/STP/SWP in JM Equity & Derivative scheme (An Income oriented scheme) will stand cancelled and investors will be exempted from adhering to the minimum specified criteria for valid SIPs/STPs/SWPs. The investors will have to make a fresh application for registering their SIPs/STPs/SWPs request in the converted equity Scheme i.e JM Nifty Plus Fund.
The scheme will adhere to the requirements of SEBI Circular no. SEBI/IMD/Circ. No. 10/22701/03 dated December 12, 2003 read with SEBI Circular no. SEBI/IMD/Circ. No. 1/42529/05 dated June 14, 2005 and subsequent relevant circulars issued on minimum number of investors and maximum permissible holding by single investors on the conversion date /within three month from the date of conversion or the end of the succeeding calendar quarter from the date of conversion, whichever is earlier.
d) Load structure – There will no entry load when the investors shift from the existing scheme to the converted scheme. However, after the conversion of the Scheme, the exit load as applicable on the date of conversion, will be charged, if the units are redeemed/switched out with in the applicable lock in period set out in the table below. The start date will be calculated w.e.f. 2nd February, 2009.
The normal load structure of equity schemes is as under and will also be applicable to the converted scheme.
In case of investments <> Entry Load: 2.25%. Exit Load: 1% if redeemed within 1 year of allotment / transfer/conversion of units.
In case of investments > = Rs. 3 crores:: Entry Load: Nil. Exit Load: 0.5% if redeemed within 3 months of allotment/transfer/conversion of units
In case of investments made through Systematic Investment Plan:: Entry Load: 2.25%. Exit Load: 1% if redeemed within 1 year of allotment / transfer/conversion of units
In case of Systematic Transfer Plan:: Entry Load: Nil. Exit Load: 2.25% if redeemed within 2 years of allotment/ transfer of units of respective installments.

Fitch assigns new credit rating to LIC Liquid Fund

Fitch Ratings has downgraded LIC Liquid Fund's bond fund credit rating to 'AA(ind)' from 'AA+(ind)'. The downgrade of LIC Liquid Fund's rating reflects the deterioration in the credit quality of the fund's portfolio. The fund is relatively diversified across industry sectors but exhibits some concentration in 'F1' rated securities (or equivalent). Fitch also took into account investment practices and management controls relating to credit quality in the asset management company when assessing the rating.
As of 30 November 2008, 33% of the portfolio was invested in assets rated 'F1+(ind)'/'AAA(ind)' or equivalent, while the minimum credit rating of securities held was 'A+', or equivalent. Fitch also notes that the portfolio management team intends to at least maintain the fund's credit quality.

HDFC Top 200 Fund (G) buys Hindustan Unilever

HDFC Top 200 Fund (G) in November 2008 took fresh exposure to only one stock. In November 2008, the scheme has purchased 20.00 lakh units (2.56%) of Hindustan Unilever while on the other hand the scheme completely exited from GAIL (India) by selling 7.50 lakh units (0.84%) along with this from Ranbaxy Laboratories by selling 4.42 lakh units (0.39%) and Suzlon Energy by selling 10.99 lakh units (0.26%) among others in November 2008.
The scheme sector-wise, took no fresh exposure to any sector in November 2008. Besides this, during the period the scheme did not exit completely from any sector. The scheme in November 2008 had highest exposure to Infosys Technologies with 8.95 lakh units (6.04% of Portfolio Size) followed by Reliance Industries with 8.39 lakh units (5.16%), ICICI Bank with 25.02 lakh units (4.77%) and State Bank of India with 7.83 lakh units (4.62%) among others.
However, it has reduced its exposure to Satyam Computer Services by selling 11.00 lakh units to 12.15 lakh units (by 2.10%), L&T by selling to 2.39 lakh units to 3.50 lakh units (by 1.11%), HDFC to 4.18 lakh units (0.53%) and Siemens by selling 2.94 lakh units to 7.15 lakh units (by 0.53%) among others in November 2008.
Sector-wise, the scheme had highest exposure to Computers - Software - at 11.34% (13.45% in October 2008) along with Refineries at 10.78% (8.52%), Banks - Private Sector at 10.04% (11.05%) and Banks - Public Sector at 8.54% (7.80%) among others in November 2008.
Where as sector wise, the scheme had reduced exposure to Computers - Software - Large at 11.34% (by 2.11%), Engineering-Turnkey Services to 1.38% (1.11%), Banks - Private Sector at 10.04% (by 1.01%) and Electric Equipment to 3.92% (0.74%) among others in November 2008.

ICICI MF introduces Quarterly SIP

ICICI Mutual fund has introduced Quarterly Systematic Investment Plan facility in additions to the Monthly SIP facility and this will be applicable from January 1, 2009. The Quarterly SIP will be having Rs 5000 as minimum amount of installments and will be minimum 4 quarterly installments.
However, all the terms and conditions (including load structure) of Monthly SIP will be applicable to Quartely SIP.