Invest a small part of portfolio

Newspaper reports on the commodity rally made Shyam Shukla curious about international mutual fund schemes. The impressive returns in the last six months — higher than the Bombay Stock Exchange Sensitive Index, or Sensex — are also on his mind.

“Financial experts say diversification helps get the best results. Since overseas funds are giving decent returns, diversifying in the foreign markets can improve the returns of my portfolio,” argues the 25-year old telecommunication engineer from Raipur.

Shukla is not alone. International funds invest in companies listed in overseas markets. Many of these are feeder funds, which means the Indian scheme invests its entire corpus in an international master fund. For instance, DSP BR World Gold Fund invests in BlackRock Global Funds — World Gold Fund.

In total, there are 25 schemes that invest in equities of commodity companies or special themes across the world. Then, there are emerging market schemes that invest in Mexico, Brazil, Hong Kong and Korea. Rajat Jain, chief investment officer-equities, Principal Mutual Fund, says, “International funds are the best way to diversify, as an investor can participate in different kinds of markets.”

“Principal Mutual Fund’s Global Opportunity Fund invests across 25 different equity markets,” adds Jain.

According to Value Research, a mutual fund rating agency, international funds have returned 19.25 per cent over six months till December 3. In the same period, the Sensex and the Nifty have given slightly less, over 17 per cent. Equity-diversified funds (largecap and midcap) returned 16.5 per cent.

But industry experts feel the short-term data may not be too definitive. “Six months is too short a period to conclude about a fund’s performance. And, this category has a mix of commodity and equity funds,” says Hemant Rustagi of Wiseinvest Advisors.

The short-term spurt in returns of international funds is mainly on the back of the rally in commodities, in which most international funds invest. Funds such as Birla SunLife Commodity Equities, DSPBR World Mining and World Gold are some of the top performing funds in the category (returns 25-30 per cent) and invest in gold in six months. Equity funds such as HSBC Emerging Markets, Principal Global Opportunities and Franklin Asian Equity have performed on a par with the Sensex (returns between 15-20 per cent). Over one year, overseas funds have returned a dismal nine per cent against the Sensex’s and the Nifty’s 16.18 and 16.78 per cent, respectively. Consequently, experts feel one could take exposure to these funds, but only partially.

There are other risks, too. These funds are dollar-denominated and influenced by currency fluctuations. The money invested is first converted into dollars from rupee, and then, into the local currency. So, a lot depends on the performance of the local currency. At the time of redemption, the conversion happens the other way round. To overcome this, risk funds could invest in markets where the currency behaves like the rupee, say experts.

These funds are taxed as debt funds. Therefore, there is a tax of 10 per cent with indexation and 20 per cent without indexation on capital gains. One of the main arguments against these funds is that since the Indian markets have been doing exceptionally well, returns from foreign equities may not be too high. Also, a debt fund treatment will eat into the returns further.

“There are enough Indian funds to help a retail investor diversify and our markets have done better than the foreign markets,” says Pankaj Mathpal, a certified financial planner.

However, when commodities are on the rise, the feeder funds really perform exceptionally. Experts say high networth individuals, or even retail investors, could look at investing 5-10 per cent of their money in such funds.

Source: http://www.business-standard.com/india/news/investsmall-partportfolio/417362/

Sebi asks MFs to disclose details on gold-focused schemes

Market regulator Sebi today directed mutual funds to disclose whether money collected for gold- focused schemes was actually invested in the precious metal.

"It has been decided that physical verification of gold underlying the Gold ETF units shall be carried out by statutory auditors of mutual fund schemes and reports (given) to trustees in half-yearly basis," the Securities and Exchanges Board of India (SEBI) said in a circular.

The half-yearly reports, which MFs first have to submit to their trustees, need to then be forwarded to Sebi.

In the reports, the MFs will have to mention whether the funds invested in Gold ETFs was in line with the amount mentioned in the Scheme Information Document and if the same has been audited, as per the Sebi circular.

"This shall come into effect from the half-yearly report ending April, 2011, by trustees to Sebi," the market watchdog said.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/Sebi-asks-MFs-to-disclose-details-on-gold-focused-schemes/articleshow/7055873.cms

Twist in the tale: Bhave likely to get extension

With just two months left for his tenure to end and three months after the government set up a search committee to find his successor, Securities and Exchange Board of India (Sebi) Chairman C B Bhave may end up getting an extension.

People familiar with the development said this might be necessary taking into account some important ongoing investigations against big companies and market operators. It is believed that an extension will ensure the continuity of the investigations.

The sources, however, added this “school of thought is still in its infancy” and no written communique had been sent either by the Prime Minister’s Office or the Ministry of Finance to the selection panel formed to choose the next chairman.

In what could be just a coincidence, a meeting of the search committee on Friday to interview the shortlisted candidates was cancelled at the last minute.

“One cannot say for sure if he will get an extension, but the idea has definitely been discussed,” said a senior industry official on condition of anonymity. “The factors that strengthen his case are the ongoing investigations and the transparency he has brought in the way some market intermediaries function,” he added.

The recent past has seen the market regulator take a tough stance against entities, including Sahara Group, Murli Industries, Ackruti City, Welspun Corporation and Brushman India. The Mumbai-based high networth individual, Sanjay Dangi, has also been barred on allegations of market manipulation. The regulator is also in the midst of a high-profile legal tussle with the MCX Stock Exchange, currently being fought in the Bombay High Court.

Another theory doing the rounds is that the government will be in no mood to attract fresh controversy by appointing a new chairman when it is already grappling with a number of allegations at the Centre.

“There is always a lobby favouring and opposing each candidate. One cannot predict until the file is signed,” says another veteran who has worked with three Sebi chiefs. “Bhave emerged from nowhere the last time and it cannot be ruled out again. The government can play safe by giving him an extension for two years. Mutual funds may be opposing him, but that is not a neutral view. Also, we keep hearing that candidates are not showing keen interest in the top job this time,” he explains.

While media reports earlier suggested that a total of seven candidates were in the fray for the post, only three-four managed to make it to the final list. While UTI Chairman and MD

U K Sinha is said to be one of the front-runners, others in the fray include Ministry of Company Affairs Secretary R Bandyopadhyay and Reserve Bank of India (RBI) Deputy Governor K C Chakrabarty. According to some media reports, State Bank of India Chairman O P Bhatt has opted out. The selection committee is headed by Cabinet Secretary K M Chandrasekhar and comprises Finance Secretary Ashok Chawla, Financial Services Secretary R Gopalan and Personnel Secretary Shantanu Consul.

Source: http://www.business-standard.com/india/news/twist-intale-bhave-likely-to-get-extension/417322/

Mirae Opportunities Fund to pay Rs 1.50/unit

Mirae Asset India Opportunities fund on Monday declared a dividend of Rs 1.50 per unit (face value – Rs 10 per unit) under the dividend option – regular plan. The record date of the dividend is December 10, said the company in a press release.

The NAV of this dividend option of the fund was Rs 16.030 as on December 1. Pursuant to payment of dividend, the NAV of the scheme (dividend option) would fall to the extent of payout and statutory levy, if any.

This is the second dividend payout by Mirae Asset mutual fund in the last two years.

Mirae Asset India Opportunities fund is an open-ended equity oriented fund and has given 70 per cent returns compared with the benchmark index BSE 200's return of 54 per cent.

Source: http://www.thehindubusinessline.com/2010/12/07/stories/2010120753041100.htm