Market may find a new level in about 3 months

Japanese major Nomura entered India in 2007 and then beefed up operations in the country after taking over Lehman Brothers’ Asia business in 2008. Last year, it bought a 35% stake in LIC Mutual Fund. Aggressively hiring, Nomura is emerging as an active player. Speaking to George Smith Alexander, Nomura Holdings deputy president & chief operating officer Takumi Shibata said the firm may launch an infrastructure fund in India even as it plans to hire more for its investment bank and back office operations here.

Any plans to launch a PE fund here?

We are working on an infrastructure fund. For the Indian economy, there is a need to invest more on infrastructure to support this growth. Long-term money is very essential for infrastructure. We are looking at raising funds from global investors as well. We do not know the size of the fund yet but it is not going to be a small fund.

You have been hiring aggressively. Will that continue?

We have to. We have around 3,000 people in India and 130 people in investment banking. We have been hiring quality people at all levels. We have hired around 10 people in the last two months and looking at hiring around 10-15 people in the coming months too in investment banking. Therefore, we are looking at a 10-15% increase. We want to continue to grow and benefit from the global network. We need to reinforce our sales and trading activities over here. Powai, in Mumbai, has the capacity for 4,000 people, but as of now, we have only 2,800 people. We will be increasing the number of people there. Our commitment to India is long-term too.

What are the plans going with the JV with LIC Mutual Fund?

We have been able to finish all the required approval processes. The next phase is to launch the joint venture and the details are being worked out. It will carry the name of LIC Nomura Mutual Fund. We will be able to bring in the benefit of IT and equity fund management infrastructure. We will bring in strong equity capability and LIC will bring in their expertise on the fixed income side. So this is a very good combination.

Are you bringing in your own people into the joint venture?

Yes, we will be bringing in our people and everything will be decided by the joint venture. Some will come from Nomura, some will come from outside. It is actually a very exciting story now.

What about retail broking?

We will look at various opportunities, though there is no such plan as of now. The most important thing is that we do things right so that we build out. We have just established a new group in Tokyo whose job is to look at retail opportunity beyond Japan. I don’t expect anything to come out from them in the very immediate future. They would look at the business opportunities here and I would be very surprised if they don’t look at India. An economy of 300-400 million middle class people is a very attractive market for anyone from the manufacturing side, fund management and private banking potential.

With the economies in the West slowing down, wouldn’t some of the export-oriented economies in Asia see a slowdown?

If we have to divide the world into four, we have the Americas, Europe, Asia and Africa. It is only Europe which is facing the current crisis. What the world needs to do now is, see that a collapse doesn’t happen in Europe and contagion is contained. The growth in countries like China, India and Indonesia are in large parts supported by domestic consumption. Of course, the relative dependence of China on exports is somewhat greater.

We are also sensing a recovery of the US economy. It’s a fragile economy. The risk is a positive surprise on the upside in the States. A 3% growth is a good one. In Europe, because of the decline in the value of euro as a currency, we sense that there are winners inside the eurozone such as manufacture of exports of products coming out from Germany, the Netherlands and northern part of Europe. While we might see total stagnation of the economy in certain parts of Europe, we are not predicting a disaster.

Where are Japanese investors putting their money?

Like other investors across the world, they are staying on the sidelines, especially in the period after the turbulence caused by the Greek debt crisis. We have started seeing a trickle of activity from the retail side — taking positions in currencies, equities, fixed income where they see value. Some currencies went through a huge decline like Australian dollars, we are yet to see a trickling of demand for the euro but people are looking at euro investment opportunities as to when it would become satisfactorily cheap.

You can also say institutions around the world are standing on the sidelines. The big question is whether it’s a three-day cure or a three-year cure and the truth lies somewhere in between. I may be wrong, but I believe it may be a three-month cure. It’s not that the problem would be solved in a three-month period, but the market would probably find a new level of activities in a reasonably short period of time.

Japan’s debt to GDP ratio is quite high and it also has large deficits. Seeing the problems in Europe and an ageing population in Japan too, will this be a problem in the future?

We will have a problem if the government does not solve the problem over the next five years. It’s a five-year challenge as opposed to five months of challenge. The reason is that the debt financing of the Japanese government is funded by domestic savings and the domestic savings are much larger than public debt. As long as the Japanese nationals do not loose confidence in their own government to service debts, even if the debt to GDP ratio is high, it doesn’t cause panic.

And also a 5% sales tax is very low and shows that Japanese people know that there is room for tax hikes. There is a growing consensus in favour of a higher consumption tax, or to say the least, there is capacity for the government to raise taxes without creating huge problem as 5% is very low. So in the long-term, they need to sort out to address the question. They are safe short-term.

Source: http://economictimes.indiatimes.com/Opinion/Interviews/Market-may-find-a-new-level-in-about-3-months/articleshow/6018448.cms?curpg=2

Birla Sun Life MF to Modify Asset Allocation Pattern of Midcap Fund

Birla Sun Life Mutual Fund has decided to modify the asset allocation and investment pattern of Birla Sun Life Midcap Fund by increasing the cash allocation limits. The changes will be effective from 10 July 2010.

Proposed (Cash) Allocation Limits:

Accordingly the scheme will invest up to 20% of assets in cash, deposits & money market instruments including Mibor linked short term papers.

Existing (Cash) Allocation Limits:

The scheme invests up to 5% of assets in cash, deposits & money market instruments including Mibor linked short term papers.

Unit holders who do not wish to hold units in view of the aforesaid change may exit the scheme from 10 June 2010 to 9 July 2010 without any exit load, at the relevant applicable NAV.

Source: http://www.apollosindhoori.cmlinks.com/MutualFund/MFSnapShot.aspx?opt=9&SecId=10&SubSecId=22,24

Mirae Assets to launch 4 more products this fiscal

Mirae Assets today said it will come out with four new products by the end of the current fiscal as it aims to capitalise on the growing interest of investors in mutual funds.

"We will be filing for more products with the market regulator SEBI and expect to launch four funds this fiscal. The portfolio of these funds will be spread over debt and equity and will give an opportunity to invest in overseas markets," Mirae Asset Global Investments (India) Equity Head Gopal Agrawal told PTI.

The MF would be launching a BRIC Consumption Fund, a Balanced Fund, an Indo-China Consumption Fund and a Monthly Income Plan, details of which are still to be worked out, he said.

Mirae Assets, one of the top global players in the emerging markets, currently manages assets worth nearly Rs 300 crore. About 90 per cent of the MF's asset under management (AUM) is in equities.

The fund has recently launched its first overseas equity fund – China Fund, focused on CSI 300 Index stocks – for Indian investors.

"We want to give investors an opportunity to diversify their portfolio from the Indian markets to emerging economies like Brazil, Russia and China. These markets have huge return potential," he said.

Mirae Assets currently has four funds operational, with the latest being Mirae Asset Emerging Bluechip Fund. The New Fund Offer (NFO) of the said scheme would close on June 22 and the returns would be benchmarked against CNX Midcap Index.

On receipt of SEBI approval, the proposed Indo-China Consumption Fund is likely to allocate 65 per cent of corpus to capture Indian consumption stories in different sectors and the balance in the stocks of Chinese consumption-driven firms.

When asked if the fund is in need for any capital or is looking for a joint venture, Agrawal said, "We have sufficient income from our advisory business. We started with a capital of $50 million and as and when required we can look at consolidation opportunities."

Mirae Assets is a player in the country's Rs 8 lakh crore asset management business. Currently there are 37 players in the industry, cumulatively managing assets worth Rs 8.03 lakh crore at the end of May.

Source: http://www.business-standard.com/india/news/mirae-assets-to-launch-4-more-products-this-fiscal/97026/on

A reform continuum

Regulators are notorious the world over for being behind the curve when it comes to policing. A sudden slew of changes are usually the result of either a scam in an industry or political pressure. Reforms initiated by the Securities and Exchange Board of India (Sebi) in Indian mutual funds reported in the last 12 months seem to be an exception. There is no scam in the industry and there is no political pressure on the regulator to show performance. We must view these changes in the context of a fallout of the 2008 crisis when the short-term debt market froze, and efficient housekeeping aimed at getting regulation abreast of market events, growth of the industry and detection of process errors.

This newspaper sees the changes in the past 18 months as part of an ongoing process to tweak the fairly robust Mutual Fund Regulations of 1996. The changes are in two key areas. The first set looks at making it less profitable for fund houses to service the corporate sector. With a bulk of the assets coming from non-retail sources, Sebi had been nudging mutual funds towards reducing their corporate focus and looking after the investor category they were supposed to—the retail investor. The biggest change will kick in from 1 July when short-term debt securities will be valued on a mark-to-market basis and not by the current straight-line method. Most retail investors will remain unaffected, but this will make the parking of short-term money by corporations less predictable and more volatile. While the industry gets used to this, the next part of reform is already on the agenda— to get funds to stop massaging their net asset value number by managing the cost figure.

The second set of reforms looks at investor protection. Protection of the investor tops the list of three objectives of a securities market regulator as mandated by the International Organization of Securities Commissions, the representative body of the world’s securities market regulators. Retail investors need protection in two areas: one, from badly constructed products; two, from being sold the wrong product, even if it is well constructed. While product construction in the Indian fund industry is good, the other area is still wide open for reform. The proposal to constructsale-side guidelines that include basics such as profiling consumers and matching consumers to suitable products are a step in the right direction. This paper would like to see the “right-selling” guidelines being extended by the ministry of finance to the entire retail financial sector.

Source: http://www.livemint.com/2010/06/02201953/A-reform-continuum.html?atype=tp

Peerless MF launches Income Plus Fund

Peerless Mutual Fund has launched a new open ended debt scheme as Peerless Income Plus Fund. The investment objective of the scheme is to generate regular income through a portfolio of predominantly high quality fixed income securities and with a marginal exposure to equity and equity related instruments.

The New Fund Offer (NFO) will open for subscription from June 9, 2010 to July 8, 2010. The scheme re-opens for continuous sale and repurchase within 30 days from the date of closure of New Fund Offer. The New Fund Offer (NFO) price for the scheme is Rs 10 per unit. (View - New Fund Offers open NOW)

Speaking on the launch, Akshay Gupta, CEO, Peerless Mutual Fund said, “Peerless group has a captive base of 8 million customers predominantly in tier 2 and tier 3 towns. It has also serviced 5 crore customers thus far. These customers are untapped for such products and have immense loyalties for the trusted Peerless Brand. Accordingly for the benefit of such customers we have tried to capture the essence of their investment behavior and saving habits, and then customise our new fund and service offering so that every Indian gets an opportunity to be a part of this new capital market revolution”.

Stressing on the value-add services part Mr. Gupta said “We are ready with multi-lingual call centers, multi-lingual statement of accounts, vernacular customer education programs. This is to ensure that all new to industry customers will be comfortable with Mutual Funds”. In terms of the style of management of these funds he said “We will be managing this fund conservatively so as to ensure minimum volatility and consistent returns. This is practically possible if we are dynamic in managing the equity component and remain cautious on the maturity of debt component.”The scheme offer growth and dividend option. Dividend option offers pay out and re-investment facility.

The minimum application amount is Rs 1000 and in multiples of Re 1 thereafter. For additional purchases Rs 100 and in multiples of Re 1 thereafter.

Entry load Nil, Exit load 1% if redeemed before a period of 1 year.

The scheme would invest 80% to 98% of assets in debt & money market instruments. Securitized debt cumulative allocation shall not exceed 25% of the net assets of the scheme (excluding foreign securitized debt). Investment in derivatives shall be up to 50% of the net assets of the scheme. It would further allocate 2% to 20% of assets in equity and equity related instruments and/ or units of equity mutual fund schemes.

The scheme's performance would be benchmarked against CRISIL MIP Blended Fund Index.

The scheme will be managed by Ganti N Murthy and Kaushik Dani.

Source: http://www.moneycontrol.com/news/mf-news/peerless-mf-launches-income-plus-fund-_463105.html