PSU fund houses score over pvt biggies in asset growth

Public sector mutual fund houses account for just a fifth of the total assets under management (AUM). But in relative terms, they have had a better run, compared to their private sector counterparts in 2009-10, when industry-wide assets grew 47% to Rs 6,13,979 crore. A similar trend was witnessed the year before, too. This indicates a preference for public sector fund houses in the period, following the crisis in financial markets in 2008.

Of the 38 fund houses which are currently operational in the country, only six funds houses — Unit Trust of India, Life Insurance Corporation, SBI Magnum, Baroda Pioneer, Canara Robeco and Principal PNB — can be categorised as those falling under the public sector, implying a ratio of 84:16 between the private and the public sector mutual fund players. It is no surprise then that private sector fund houses account for a predominant share of the assets

under management.

According to Sebi data, private players together accounted for about 78% of the industry wide assets under management at the end of financial year 2009-10. This is two percentage points lower than their market share in the preceding year.

If one were to consider the growth in assets over the past few years, private players clocked a 59% growth in their assets during the bullish phase of 2007-08. This was followed by a decline of more than 19% the following year when markets across the globe sold off. The rebound in 2009-10 led to an increase of about 43% in their assets last year.

In case of public sector fund houses, a growth of about 39% in the asset base in 2007-08 was followed by a decline of about 9% in the meltdown year of 2008-09. However, during the recovery phase of 2009-10, the assets of the public sector fund houses have jumped by nearly 66%. This is the highest in the past six years. In absolute terms, the public sector fund houses have seen their assets grow from Rs 82,000 crore in 2008-09 to more than Rs 1,35,000 in 2009-10.

Among the public sector fund houses, the largest percentage rise in the average assets under management during the period April ‘09-March ‘10 was accounted for by Baroda Pioneer (90%) followed by LIC which saw its assets rise by about 62%. Interestingly, both Baroda Pioneer and LIC have a higher proportion of debt assets compared to equity assets.

These statistics reflect investors’ changing preference for public sector mutual funds vis-à-vis the private sector ones. Industry officials says the collapse of some of the biggest names in the private sector financial organizations globally in 2008, could have partly contributed to this trend.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/analysis/PSU-fund-houses-score-over-pvt-biggies-in-asset-growth/articleshow/5823322.cms

SEBI - IRDA spat: Financial literacy will follow

Fish or fowl? What are ULIPs (unit-linked insurance products)? For all the brouhaha over ULIPs last week, the answer is, and always has been, neither! Yet judging by their phenomenal popularity, investors neither knew nor cared! Since they first came on to the scene about a decade ago, ULIPs have enjoyed a rare success.

One can try and hypothesise why: as a part insurance product, part savings product, maybe they fulfill a felt need. Maybe they epitomise the Indian attitude to life in general – a little of this, a little of that and not too much of anything! How else can one explain our fondness for Khichdi or Avial!

Consider. In 2008-09 as many as 7.03 crore ULIPs were sold for a staggering Rs 90, 645 crore (close to 1.3% of the country’s GDP!) while during the last financial year alone (April- February) another 16.7 lakh ULIPs were sold.

All the more reason why the very public spat between the capital markets regulator, the Securities and Exchange Board of India (SEBI) and the insurance regulator, Insurance Development and Regulatory Authority, (IRDA) last week is puzzling. Remember, the present product has been in existence for almost 10 years and an earlier avatar, ULIP 71, a UTI (Unit Trust of India) product with a term cover from LIC has been in existence since 1971.

Needless to say there are a lot of theories floating around. These range from the usual turf-battle theory to regulatory capture of SEBI by a mutual fund industry,(incensed at its business being hit with the whittling down of MF agents’ commissions, even as insurance agents, riding generous commission push ULIPs ever harder), to the more conspiratorial one that sees the hand of the finance ministry in using the spat as a ploy to push through its pet project of a Financial Stability and Development Council to upstage the present High Level Committee on Capital Markets, headed by the Reserve Bank of India .

As with all such theories they will have to remain conjectures. We will now have to await the final outcome of either the court case or perhaps an out-of-court compromise between the two regulators. But what is noteworthy is all this is not the minutiae of the spat but an entirely unintended consequence: overnight investor education!

For years, financial market regulators have been trying to get ordinary investors to take informed decisions when choosing between different financial products. In vain! Whether it is investment in the stock market or investment in an insurance or pension product, few investors care to do any homework before investing, relying instead on ‘tips’. Indeed it is doubtful if many ULIP holders were even aware how much of their money goes to buy insurance and how much is a pure play on the stock market.

Not any longer! After last week’s unseemly spat, triggered by an ill-judged attempt by to force the issue, a whole lot of investors who in the past had never cared to figure out what they were buying, are now wising up. Companies and agents say they are deluged with inquiries. And that is the best outcome of the spat.

Ultimately the storm will blow over but the financial literacy gained will stand investors in good stead. For many investors in ULIPs it might be a costly first lesson but it is unlikely to be one that they will forget easily. At the end of the day, it matters little to ordinary investors whether a product they buy is regulated by X or Y. What matters is that it is properly regulated and there is transparency. So whether SEBI ‘wins’ or IRDA wins, what is essentially a petty turf war is immaterial as far as they are concerned.

The lesson they need to take home is that there is no alternative to financial literacy. The job of the regulator (any regulator) is to frame rules and ensure all players play by the same rules and also make sure there is complete transparency. Once that is done, it is up to the investor to take his own decisions. And live with the consequences!

It is not the job of the regulator to ‘protect’ a man from his own ‘folly’. Not only because what is folly to one may be eminently sensible to another but also because it is not the regulators job in the first place. As financial products become more and more complex, investors need to remember that when it comes to their savings, they must be their own masters!

Source: http://economictimes.indiatimes.com/Opinion/Columnists/Mythili-Bhusnurmath/SEBI---IRDA-spat-Financial-literacy-will-follow/articleshow/5826614.cms?curpg=2