Performance, size correlate with mutual fund flows: CRISIL

Fund flows into mutual funds in recent months, have shown a strong correlation to performance and size of fund houses. Large fund houses, with a large number of better performing funds in line with the CRISIL Composite Performance Ranking (CPR) of mutual funds are attracting higher inflows reveals a study by Crisil.
The Indian mutual fund industry`s average assets under management (AAUM) grew for the third month in succession and stood at Rs. 5.02 trillion in February 2009 as compared to Rs. 4.62 trillion in January 2009. The AAUM crossed the Rs. 5 trillion milestone in February 2009 for the first time after it dipped below this level in October 2008.
According to Krishnan Sitaraman, head, CRISIL FundServices, ``The top three fund houses, which recorded the highest increase in absolute AAUM over January and February 2009 have a large number of funds which fall in the CRISIL~CPR 1 (very good) and CRISIL~CPR 2 (good) ranking clusters and are large in size.``
These included Birla Sun Life mutual fund (11 funds of which were ranked CRISIL~CPR 1 or CRISIL~CPR 2), ICICI Prudential mutual fund (8 funds ranked CRISIL~CPR 1 or CRISIL~CPR 2) and Reliance Capital Mutual Fund (10 funds ranked CRISIL~CPR 1 or CRISIL~CPR 2).
Size appears to be a key factor determining choice, as large fund houses have recorded higher net inflows as compared to the relatively small ones, a number of which have seen lower inflows, if not net outflows.
Added Krishnan, ``With equity markets still volatile, and the economic climate uncertain, the AAUM growth currently is driven mainly by debt and liquid funds. Corporate bond yields fell in February 2009 and in such an environment, debt funds held an edge with respect to returns.``
In absolute terms, mutual funds received net inflows of Rs. 340 billion in February 2009 as against Rs. 668 billion in January 2009. Income funds received the largest share of net inflows with Rs. 199 billion followed by liquid funds worth Rs. 149 billion.
However Gilt funds witnessed net outflows of Rs. 5 billion for the first time since November 2008 as G-Sec yields rose in February 2009 adversely impacting returns from these funds. Equity funds witnessed marginal net inflows of Rs. 4 billion, a majority of which were in Equity Linked Savings Schemes (ELSS) as they constitute a tax-planning instrument.
The share of debt funds (income, gilt and liquid) in the Indian mutual funds universe has risen from 62% a year ago (February 2008) to 77% in February 2009 indicating a shift in investor preference towards debt funds due to the change in market dynamics.

Source: http://www.myiris.com/newsCentre/newsPopup.php?fileR=20090319180635196&dir=2009/03/19&secID=livenews

Hemendra Kothari sells stake, exits DSP Merrill

DSP Merrill Lynch (OOTC:MERIZ) will now be fully owned by Merrill Lynch or effectively by Bank of America (NYSE:BAC) , which had taken over Merrill Lynch for $50 billion last year. As a result, Bank of America owned 90 per cent in DSP Merrill Lynch in India.
Mr Kothari, a high-profile investment banker, is also retiring as Chairman of the company at the end of the month. Mr Kevan Watts will head the company, it is learnt.
Mr Kothari said the sale was planned around six months ago, but he had decided to wait a while. “When the time came for announcement of the merger of Merrill Lynch with Bank of America, I felt it was the right time to sell when integration is taking place across the world,” he told Business Line.
He founded the company in 1975 when it was called DSP Financial Consultants. It was named DSP Merrill Lynch Ltd in 1995 after a stake sale to the American company. Holding in MF biz
Mr Kothari will still serve as the non-executive Chairman of asset management firm DSP BlackRock Investment Managers, a joint venture between the DSP group (NASDAQ:DSPG) of firms owned by the Kothari family and New York-headquartered BlackRock Inc. (NYSE:BNY) (NYSE:BLH) (NYSE:BNJ) (NYSE:BPK) (NYSE:BBF) (NYSE:BHK) (NYSE:BFZ) (NYSE:BJZ) (NYSE:BLK)
The asset management company had acquired 40 per cent stake held by Merrill Lynch in the mutual fund DSP Merrill Lynch Fund Managers in January. The remaining 60 per cent is held by DSP Group.
After the transfer DSP Merrill Lynch was renamed DSP BlackRock Investment Managers, and their mutual fund was renamed DSP BlackRock Mutual Fund. The fund has Rs 14,000 crore in assets under management at the end of February.
The mutual fund business is expanding and the company plans to expand its employee base, said Mr Kothari. Some jobs were being cut but, in the net, one would see an addition of staff, he said.
With the day-to-day affairs of the company being managed by a professional team, he would now be free to concentrate on philanthropic activities.

Source: http://www.istockanalyst.com/article/viewiStockNews/articleid/3128885

Dividend-paying equity schemes fall by over 50% in Jan-Mar

The decline in the stock market has taken its toll on the dividend payout of equity schemes. Only 36 equity-oriented schemes have declared dividends in the January-March period, compared to 85 schemes in 2008.

According to data from Mutual Funds India, a mutual fund research agency, only a few schemes of ICICI Prudential Mutual Fund, HDFC Mutual Fund and Franklin Templeton have been consistent in paying dividends between 2006 and 2009.

The data reflected that dividends declared by these schemes rose consistently in the boom period of 2006 -2008. But these schemes have been hit in the current market crash and, as a result, their dividend-paying ability has eroded substantially.

For instance, Franklin India Blue-Chip Fund, which had declared dividend in the range of 30 per cent to 70 per cent during 2006-2008, has paid only 30 per cent in 2009. While HDFC Long Term Advantage Fund has pruned dividends from 60 per cent to 35 per cent, ICICI Dynamic Plan has reduced it from 20 per cent to 6 per cent.
There were other equity schemes that had a great track record of dividend payment during financial year 2006-07 and 2007-08. But most of these have paid significantly lower in 2008-09.
Birla Sun Life Tax Relief 96, which had given a staggering 1,510 per cent dividend in 2006-07 and another 200 per cent in 2007-08, has paid a dividend of only 50 per cent in 2008-09.
Equity schemes have suffered greatly in the meltdown since the market scaled its all-time high on January 8, 2008. In fact, the fall was so sharp that fund houses were unable to exit stocks. With almost negligible chance of profit-booking, fund houses have found it extremely difficult to make dividend payouts this year.
Equity-oriented schemes have reported value erosion of Rs 81,307 crore in the 11 months of the current financial year.
The unaudited financial results of mutual funds for the period ended September 2008 showed that fund houses had booked Rs 3,858-crore loss on sale of investments. Even the reserves and surpluses declined by Rs 28,900 crore on account of value erosion.
Even investors have not been enthusiastic about investing in mutual funds. Only Rs 3,580 crore was invested in this financial year so far, compared to Rs 45,927 crore during the same period in 2007-08.

Source: http://www.business-standard.com/india/news/dividend-paying-equity-schemes-fall-by-over-50-in-jan-mar/352346/

Shinsei Bank ties up with Rakesh Jhunjhunwala for mutual fund venture

Jhunjhunwala has picked up around 15% in the venture and Japan's Shinsei Bank has 75% stake in it.
One of the top proprietary investors in the country Rakesh Jhunjhunwala is said to have become the local partner for Shinsei Bank for asset management business in India. Although, this has been in the rumour mills for more than a year now, as per this report Jhunjhunwala has picked up around 15% in the mutual fund venture. Japanese financial services major Shinsei owns 75% while the remaining 10% is with Sanjay Sachdev, the India head of Shinsei Corporate Advisory Services.
The mutual fund arm Shinsei Asset Management had received Sebi approval to set shop in February and has started with a PSU debt fund. Shinsei had earlier in 2007 roped in N Sethuraman Iyer from SBI Mutual Fund where he was the chief investment officer.
As per Shinsei’s website, Iyer is the CIO of Shinsei Investments while Sachdev is the country manager-India & Regional Manager (SE Asia) – Fund Management. Piyush Surana (fomer COO of Alliance Capital) is the CEO of the firm.
This would be the second Indian entity besides the existing Shinsei Corporate Advisory Services which provides investment and corporate advisory services to financial institutions. Earlier in August 2007, it had signed a JV with UTI Asset Management Company to set up UTI International (Singapore) Pte Limited for investment management and distribution of financial products in the South East Asian region. It also had a venture with UTI in Japan under the Shinsei UTI India fund.

Source: http://in.reuters.com/article/indiaDeals/idINIndia-38598620090319