Fund houses offering regular profit plans to entice investors

To get back equity-wary investors, fund houses and their portfolio management services (PMS) have started schemes that will regularly book profits. In these funds, mutual funds and PMS will realise appreciation at specific target returns and transfer profits either to a safer investment avenue or give the money back to the customer.

ICICI Prudential Asset Management and Edelweiss Mutual Fund are the first two to launch such schemes, which are at the subscription stage. Edelweiss’ EDGE Fund will close on May 8 and ICICI Pru’s Target Return Fund will close on May 14. Reliance Mutual Fund too plans to launch a similar themed fund — Target Appreciation Fund.
While ICICI Prudential and Reliance Mutual Fund has started a fund completely dedicated to such a scheme, called Target Return Fund and Target Appreciation Fund respectively, Edelweiss Mutual Fund has made it a part of its equity diversified fund called EDGE Fund.
Under PMS, JM Financial is offering this scheme under its India Resurgent Portfolio while ICICI Prudential’s scheme is called Target Return Portfolio.
“This strategy is the need of the hour in the current market situation. Due to the recession, the markets are bound to see a lot of rise and fall. Growth will not be linear till the global economy comes out of the turmoil, and that at least is two-three years away,” said Vipul Shah, director and head of private wealth group, JM Financial. In fact, the company said that it would close the scheme if the portfolio generates 50 per cent of absolute returns within two years.
Though the central theme of the mutual funds are the same — book profits on appreciation — all three funds operate this in different way. ICICI Pru’s fund has four targets called triggers. These include 12 per cent, 20 per cent, 50 per cent and 100 per cent. An investor can opt for any one of them and whenever the investment appreciates meets the targets the profits are booked and transferred to a debt fund.
Edelweiss has multiple options for an investor. He can select its own target or even a date at which the money should be redeemed. He can either opt for transferring the money to a debt fund or get the cheque for the profit.
The working of Reliance Mutual Fund’s scheme is slightly different. Target appreciation Fund takes the 45-day average of takes Bombay Stock Exchange’s Sensex as a base. It keeps giving the appreciation back to the investor when the base appreciates by 20 per cent, 40 per cent, 60 per cent, 80 per cent and 100 per cent.
“These schemes will give comfort to first-time investors, who usually come when markets are at peak and then lose out money when they fall. These schemes will book profits regularly in a discipline manner,” said Sundeep Sikka, CEO, Reliance Mutual Fund. He points out that this will encourage more investors to come to mutual funds. “Currently, only 3 per cent of the population invest in mutual funds,” Sikka said.
Investment adviser too gave a thumbs up to the idea. “Profit booking in a disciplined manner is essential. Investors tend to become greedy when they see appreciation and become fearful during correction,” said Sriram Venkatasubramanian, head — wealth management, FCH Centrum Wealth Managers. But he also added that in such schemes, fund manager will face a constrain. “Even if they believe that some stock will give higher returns if held, the fund managers will have the pressure to sell due to the stated mandate,” Venkatasubramanian said.

Source: http://www.business-standard.com/india/news/fund-houses-offering-regular-profit-plans-to-entice-investors/357419/

Shinsei may exit MF venture here, post-US subprime knocks

Japanese financial services firm Shinsei Bank may exit its mutual fund venture in India, and has already initiated talks with Indian Bank to sell its stake, two people familiar with the development told ET. Indian Bank is exploring the possibility of setting up a mutual fund venture in India. When contacted, the spokesperson for Shinsei in India denied the development. “There is no such thing happening... these are just rumours,” he said.
It is believed the move has been prompted by the problems being faced by Shinsei Bank in its home country. According to foreign media reports, Shinsei Bank is in talks for a merger with Aozora Bank, also Japan-based. Both banks have been hit by their exposure to US subprime loans, and other failed overseas investment bets.
Shinsei Bank had joined hands with leading proprietory investor Rakesh Jhunjhunwala and Freedom Financial promoted by Sanjay Sachdev, the India head of Shinsei Corporate Advisory Services. Shinsei holds 75% in the asset management company, Mr Jhunjhunwala 15% and Freedom Financial, the rest. Shinsei got Sebi approval for starting its mutual fund operations early this year, after waiting for nearly three years. It is yet to launch a single fund, though it has got the Sebi nod for a liquid scheme, and is awaiting clearance for a PSU Bond Fund.
In 2007, the Japan-based bank had roped in N Sethuram, former chief investment officer of SBI MF, as CIO of its mutual fund venture. It now has a team of about 32 people. “Getting a mutual fund licence is a time- consuming process... the new buyer gets a ready platform. Apart from the licence, they also get the infrastructure,” said an official familiar with the regulatory process, on why a buyer would be interested.
Shinsei has invested more than $150 million in India through its proprietary fund. These include an investment in the State Industrial Corporation of Maharashtra (SICOM), the investment arm of the Maharashtra government, and in a hotel venture.
The bank is also learnt to be reviewing its joint venture with UTI International, a 100% subsidiary of UTI Asset Management Company, which was set up in December 2006 to explore investment opportunities in South East Asia. It has an offshore fund in partnership with UTI MF, which manages assets worth more than Rs 1,000 crore. When contacted, a UTI MF official declined to comment on its ventures with Shinsei.

Source: http://economictimes.indiatimes.com/Personal-Finance/Shinsei-may-exit-MF-venture-in-India/articleshow/4501404.cms

Union Bank to enter MF business by Dec: Official

State-run Union Bank of India, in joint venture with Belgium-based company, plans to enter the mutual funds business by December this year and hopes to receive the market regulator Sebi's approval to set up the firm by June 30, a top bank official said.
"The bank expects to receive the Sebi nod for JV by December. We would be able to enter the market with our first product by December this year," Union Bank General Manager Personal Banking & Operations S Govindan said here.
The state-owned lender has entered into an agreement with Belgium-based KBC Group for the mutual funds JV in November last year. According to the intial agreement, Union Bank will hold a majority 51 per cent stake in the company while the rest will be with KBC Group.
Union Bank plans to invest Rs 48.07 crore in the JV by December while KBC will contribute Rs 64.93-crore, Govindan said.
The bank plans to change its 200 branches as dedicated centres for the mutual fund operations. However, the bank's entire branch strength will be used as selling points, Govindan said.
"There is always a scope for innovation in the mutual fund industry. Shaping our products according to the customer needs will be the key strategy," Govindan said.

Source: http://economictimes.indiatimes.com/Personal-Finance/Mutual-Funds/Union-Bank-to-enter-MF-business-by-Dec-Official/articleshow/4496213.cms