SBI Mutual Fund may get a new owner

SBI Mutual Fund’s ownership may soon see a change, with its shareholder Societe Generale Asset Management merging with Credit Agricole Group’s asset management arm globally earlier this year to form a new entity, Amundi.

SBI owns 63% in SBI MF, while France’s Societe Generale Asset Management owns 37%. Sources said SBI MF, which has assets under management worth around Rs 37,000 crore, has sought Sebi’s approval to effect the change in ownership following the merger. A person familiar with the matter said the change will be only in the name of the shareholder, but will not impact the shareholding pattern.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/SBI-Mutual-Fund-may-get-a-new-owner/articleshow/5837964.cms

Now, mutual fund agents on Sebi’s radar

The Securities and Exchange Board of India (Sebi) is planning to introduce norms to regulate mutual fund distributors, said a top official. The stock market regulator is working with the Association of Mutual Funds in India (Amfi) in this regard and plans to effect the proposed norms from June, said Sebi’s executive director KN Vaidyanathan.

“Distributors have to be regulated and we have given the responsibility to Amfi. Every component of capital market intermediaries need to be regulated,” Mr Vaidyanathan told reporters at a Federation of Indian Chambers of Commerce and Industry (FICCI) conference here on Tuesday.

India’s fragmented mutual fund distribution industry is largely unregulated and has been in shambles since August after Sebi banned asset management companies (AMCs) from charging investors the so-called entry load that was mostly used to remunerate distributors.

The new rule gave very little incentive for distributors to sell mutual fund products. While the larger distributors have been less affected by the move, smaller distributors have taken a severe hit, with many of them even shutting shop.

Now, Sebi along with Amfi, is attempting to put processes in place to train and certify distributors.

“The examination which we (Amfi) initiated in 2000 is now undergoing a change. The exam will now be conducted by the National Institute of Securities Market (NISM),” said AP Kurian, chairman, Amfi. “NISM will now conduct all examinations for market participants in the securities market,” he said.

There are around 65,000 mutual fund agents across the country who have Amfi registration numbers (ARN).

The need to train distributors was mentioned in the Swarup Committee’s consultative paper on investor awareness and protection. The paper emphasised on the pressing need in the market for a regulatory structure for mutual fund, insurance and pension sellers and advisers.

There are 30 lakh plus insurance and mutual fund agents and bank officials (as per Swarup committee estimates) which sell retail financial products in India. Separately, at the FICCI event on Tuesday, Sebi chairman CB Bhave stressed on the need to cut costs in securities market transactions and also said sellers of derivatives products should not ‘indiscriminately sell these products’.

“One should see that products are sold to only suitable investors. We need to keep appropriateness in mind... We should not sell these products indiscriminately to push volumes,” Mr Bhave said.

“Cost of securities market transactions is a challenge. We need to be conscious of cost- cutting in market transactions,” he said.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/Now-mutual-fund-agents-on-Sebis-radar/articleshow/5837944.cms

MFs rediscover the virtues of passivity

With many funds lagging benchmarks, index funds and ETFs become attractive.

Moving away from active management, a clutch of fund houses are planning to launch passively managed funds that include index funds and ETFs (exchange-traded funds).

For the first time, mutual funds (MFs) are showing increased inclination towards passively managed funds after the downturn, when actively managed portfolios were hurt more than index funds.

IDBI Bank, while announcing its MF venture recently, announced it would launch only index funds. “The reason is that they are easy to understand from a retail investor’s perspective and come with lesser expenses than an actively managed fund,” Krishnamurthy Vijayan, CEO of IDBI MF had said at the time of the launch. For a new fund house such as IDBI, it makes all the more sense because costs involved in running the fund are lower.

IDBI is not the only one. Motilal Oswal, which recently got approval to start an asset management business, has filed for a Nifty-based ETF. The underlying index for this is MOSt 50 index, fundamentally an enhanced index based on the S&P CNX Nifty index.

Nitin Rakesh, CEO, Motilal Oswal MF, said, “Markets are becoming more efficient, which makes it all the more difficult to beat the benchmark. With Sebi scrapping the entry load, distributor differentiation for this product has gone. And, the fact that a couple of global players are looking to launch ETFs itself speaks about the importance of this product. ETFs are a huge asset class globally. In India, there is a lot of scope for this product to grow.”

Reliance MF, the largest fund house, has filed for MSCI India Growth ETF and MSCI India Value ETF. These would track the MSCI India index. Sources said a couple of other fund houses, one being Deutsche, are also planning to launch passively managed funds.

Currently, Benchmark MF is the only fund house dedicated to ETFs. It launched a Hang Seng ETF last month and plans to launch an infrastructure ETF.

Experts said a lot of investors became disenchanted with actively managed funds after the market crash as most of them were unable to beat the index. In spite of entrusting their money with professional fund managers, retail investors burnt their fingers, with performance in some cases being worse than the index. According to rough estimates, only 17 per cent funds globally outperform the indices.

“The case for indexing is gaining strength in India if one goes by the numbers. Ten years back, a majority of funds used to beat their benchmarks, but now only 50 per cent funds do that. And, the universe of actively managed funds is so large that it is difficult for investors to figure out which funds are outperforming the indices,” said Dhirendra Kumar, CEO, Valueresearch Online, a fund tracking firm.

Distributors said index funds and ETFs would become more popular once the MF platform of the Bombay Stock Exchange and the National Stock Exchange got active. Currently, although these platforms exist, the number of trades is quite small.

Financial planners and advisors said for somebody with a 10-15 year horizon, index funds made more sense as they would beat actively managed funds due to the lower fee structure. Besides, it gets increasingly difficult to beat the market on a regular basis year after year for a long period of time.

Source: http://www.business-standard.com/india/storypage.php?autono=392426