Investors have many NFOs to choose from

When ICICI Prudential launched its Target Return Fund last month, not many thought it had a chance in a market that was licking its wounds, with the benchmark Sensex having fallen from a peak of over 20,000 a year ago and hovering around 12,000 in May 2009.
The fund's CIO Nilesh Shah had then commented: "Any money is good money in these markets." Then came May 16, when the results of Polls 2009 were announced, giving the incumbent Congress-led UPA coalition a decisive mandate to stay in power for another five years.
The markets jumped in the next trading session by almost 2000 points, and the fund was one of the early gainers, collecting a whopping Rs 800 crore, this at a time when investors were steadily losing confidence in equity and related instruments.
The funds success seems to have rekindled the hopes of the mutual fund industry, which has been starving for fresh cash from equities over a year now. As many as 14 equity funds are currently lined up with Sebi, awaiting the market regulator's green signal.
Leading the new fund offer (NFO) race is the country's largest asset management company Reliance with as many as six equity schemes, including an international fund and a gold fund. The other fund houses lined up to launch their offerings in the market pretty soon include IDFC, DSP Blackrock, Tata, Fidelity, Canara Robeco and the newcomer Shensei Asset Management.
NFOs, often treated as vehicles to raise money by the mutual fund companies, had virtually dried up over the last year and a half owing to the prevailing slowdown in the general economy. Those launched had failed to ignite much interest in the investors. IDFC, which had launched its India GDP and Strategic Sector (50-50) earlier this year, has managed to accumulate only Rs 51 crore and Rs 22 crore respectively in each of these funds till date. JM Financial, which had launched its Nifty Plus and Large Cap this year, was also a complete failure with assets under management of Rs 10 crore and Rs 5 crore respectively till date.
Though the fund managers and the distributors at large are upbeat with the return of investor interest in the existing equity schemes, it would be rather interesting to see if each of these funds will succeed in igniting the same level of investor interest as ICICI Prudential.

Source: http://economictimes.indiatimes.com/Analysis/Investors-have-many-NFOs-to-choose-from/articleshow/4584334.cms

Midcap will continue to outperform: Chaturvedi

Ved Prakash Chaturvedi, MD, Tata Mutual Fund feels that out performance in the midcap sector will continue over the medium term.
Chaturved told CNBC-TV18, "I have been a long term bull on Indian midcaps. The story in India is carefully selected midcaps. One has to be careful, you can go terribly wrong and lose a lot of money but the long term story of India will be midcaps. My sense is that the out performance in the midcap sector will continue over the medium term. Since there has been such a sharp run up my gut feel is that there is very short and swift correction in the market, which will at some point of time happen but generally the mood will be good cheer. When we look back over the next 12 months on this period, midcaps would have out performed.”

Source: http://www.moneycontrol.com/india/news/stocks-views/midcap-will-continue-to-outperform-chaturvedi/399331

Banking exchange traded funds offer good upside

Banking remains one of the core sectors of the Indian economy that has been benefiting from the overall growth in the economy. Investors keen to invest in banking sectors have chosen mutual fund route for a long period of time. Among the actively managed funds, there are too many options to choose from and there is no performance guarantee like any other mutual fund scheme.
There is a segment of investors that opts to park their funds in the exchange traded funds (ETF) that track CNX Bank Index. These investors have benefited on two parameters. First: returns. Second: the flexibility and quantum of transactions these exchange-traded funds offer.
There are two offerings in the market that offer this option. Banking BeES is an ETF that comes from Benchmark AMC. The scheme was launched in May 2004 and aims to track CNX Bank Index with Rs 107 crore worth of assets under management, as of April 31, 2009. The fund has delivered 25.47% annualised returns since launch. Formidable player in the industry – Reliance AMC – has Reliance Banking ETF, which was launched recently in May 2008, has Rs10.02 crore under management as of April 31, 2009.
The two funds are doing well for some time now in sync with the booming underlying CNX Bank Index and have delivered more than 80% over last three months. The only difference that one may come across is the ‘expense ratio’ of both the funds. Benchamark Bank ETF (BeES) has an expense ratio of 0.5% whereas its relatively new counterpart from Reliance AMC stands at 0.35% on annualised basis.
Expense ratio means a measure of what it costs an investment company to operate a mutual fund. Says Rahul Amritlal, analyst with a financial planning firm, “Even though exchange traded funds have offered good returns, investors should keep a tab of the quantum of transactions these funds see on daily basis, while transacting in exchange traded funds.” While BeES sees in excess of 1000 units traded everyday, Reliance Bank ETF experiences much less transactions thanks to the small asset base.
Not to mention of these funds’ dependence on the sector it maps. Hence, investors should take into account the factors that would sustain the growth of banking sector. The banking sector funds also carries the concentration risk, as the funds future is married with the performance of just one sector and there is no scope for diversification. While recommending actively managed funds over index funds a mutual fund analyst with a brokerage says, “Given the evolving nature of Indian stock markets, there is ample scope for outperformance by mutual funds. Hence it makes more sense to go for actively managed funds than the index funds.”

Source: http://economictimes.indiatimes.com/Personal-Finance/Mutual-Funds/Analysis/Banking-exchange-traded-funds-offer-good-upside/articleshow/4584142.cms

Experts are valuing the AMC at 3-4 per cent of its assets under management.

Fortis Mutual Fund and Sundaram BNP Paribas Mutual Fund are likely to merge following BNP Paribas’ global acquisition of Belgium-based Fortis for €4.5 billion.
Sources familiar with the developments said discussions between senior executives from both the mutual funds had started and the global teams were expected to visit Indian shortly to finalise the deal.
Sources said a sell-off was ruled out as BNP wanted to retain the assets.
Experts are valuing the AMC at 3-4 per cent of its assets under management. Sundaram Finance, which holds 49.9 per cent stake in Sundaram BNP Paribas AMC, will have to pay 50 per cent of this amount if a merger were to happen.
Almost 90 per cent schemes of Fortis Mutual Fund are fixed income ones, a fact that may skew its valuation, say experts. It also has a large number of fixed maturity plans.
BNP Paribas has acquired all the operations of Fortis which include asset management, private banking, merchant banking and consumer finance outside the Netherlands. This, in effect, means that Fortis Mutual Fund will be a part of Sundaram BNP Paribas Mutual Fund. However, under Indian regulations, a mutual fund cannot have two licences. This makes the merger mandatory.
TP Raman, CEO of Sundaram BNP Paribas Mutual Fund, said, “We have no news or information that we can share at this point in time”. An emailed query to Fortis remained unanswered. BNP Paribas’ Country Head Frederic, Amoudrou, refused to comment.
ABN Amro Mutual Fund was changed to Fortis Mutual Fund in November 2008 after Fortis acquired the investment management business of ABN Amro in a global deal. Sundaram BNP Paribas had assets under management of Rs 5,336.36 crore at the end of March 3, 2009, while Fortis is comparatively smaller in size with assets of Rs 357.75 crore.
Mutual fund industry has been going through a wave of consolidation post October 2008, when mutual funds faced a severe liquidity crisis and the Reserve Bank of India had to step in to provide them a line of credit. The problem did not stop there as several mutual funds’ investments in real estate and NBFCs’ (non-banking finance companies’) papers went wrong.
Religare acquired Lotus Mutual Fund in November 2008 after the latter went into trouble due to its huge exposure to fixed maturity plans (FMPs). Goldman Sachs has already pulled out from its announced asset management venture in India while Bharti is planning to exit its mutual fund venture with Axa.

Source: http://www.business-standard.com/india/news/fortis-sundaram-bnp-paribas-may-merge-funds/359270/