SEBI begins work on infra debt funds for MFs: Sources

The Securities and Exchange Board of India (SEBI) is doing its bit to boost infrastructure funding in the country. The market regulator is working on a proposal for an infrastructure debt fund, specifically for mutual fund, reports CNBC-TV18’s Vidhi Godiawala quoting sources.

Taking a cue from their budget announcements and looking at boosting infra financing in the country, the sources said that SEBI is exploring options to come out with an infra debt fund for mutual fund houses. This proposed mutual fund infra debt fund is still in its conceptualization phases.

The budget 2011 allowed FIIs to invest up to USD 25 billion in corporate infra bonds. Sources also said that the proposed fund will be a separate category of a mutual fund, where SEBI is in talks with the finance ministry and mutual fund houses in terms of the final structure and modelling of this proposed infra debt fund.

FIIs will be investing their money into this proposed mutual fund infra debt fund. In turn, the fund houses will invest FIIs money into the various infrastructure projects across the country.

However, the paper or security proposed fund would have a minimum residual period of maturity of five years at the time of investment.

The budget had also promised that FII investments into infra funds will be exempt from the 20% withholding tax. Sources informed that the regulator and fund houses are looking at clarity on the taxation of this proposed infra debt fund.

They are seeking an exemption of that 20% of the withholding tax, so that it would make it more lucrative for the FIIs to come in and pout the money into this proposed infra debt funds, which will be floated by the mutual fund houses.

In the mean time, mutual funds are receiving feedback from the various FIIs. They are trying to see whether there is an appetite for the fund. They will need finance ministry approval for the same.

However, the initial feedback from the finance ministry has been positive on this front.

Source: http://www.moneycontrol.com/news/mf-news/sebi-begins-workinfra-debt-funds-for-mfs-sources-_538788.html

MFs cut stake in most BSE-500 firms

Mutual funds scaled down their exposure in more than half of the BSE-500 companies in the quarter ended March on a sequential basis. The index comprises largecap as well as midcap stocks.

Data compiled by the Business Standard Research Bureau shows of the 385 companies which had announced their latest shareholding, fund houses cut their stake in about 200.

The companies where MFs pared stake include Kingfisher Airlines, HCC, Voltas, Hindalco, Patni Computers, Axis Bank, Larsen & Toubro, Tata Motors and Mahindra & Mahindra, among others.

Fund managers say the quarter was marked with dividend payouts and had seen churning and stock picking within sectors. For instance, fund houses brought down stake in automobile companies Tata Motors and TVS Motors, but increased the exposure in other sectoral companies such as Maruti Suzuki and Bajaj Auto. This also held true in banks & financials, information technology and metals.

Gopal Agrawal, equity head at Mirae Assets, says, “On an aggregate basis, the reduction (of stake) is very low. The quarter saw redemption as well as Initial Public Offerings, for which MFs generated cash.”

Jimmy Patel, chief executive officer at Quantum Mutual Fund, agrees.

“Several fund houses declared dividends. Moreover, there was profit booking amid redemption pressure,” he adds. For 2010-11, domestic funds saw a net outflow of Rs 49,406 crore, compared with a net inflow of Rs 83,081 crore. The equity category witnessed a historically high outflow of Rs 13,405 crore, while income funds saw an outgo of Rs 36,706 crore in 2010-11. Diversified equity funds have reduced exposure to mid-cap stocks over recent months, explains Dhruva Chatterji, research analyst at MF tracker Morningstar India.

By Morningstar’s statistics, the average percentage of capital allocation for diversified equity funds in mid-cap stocks slipped to 20.5 per cent in March against 21.27 per cent in December. In the case of small caps, the exposure reduced to 14.15 per cent, compared with 14.82 per cent. During the quarter, MFs increased their stakes in 145 of the BSE-500 companies, which included Zuari Industries, Cox & Kings, YES Bank, HPCL, BPCL, Tata Steel, Infosys and Bajaj Auto.

Source: http://www.business-standard.com/india/news/mfs-cut-stake-in-most-bse-500-firms/433741/

Close-ended mutual fund schemes see a sharp rise

With a fourfold increase in new launches, FMPs emerge the favourite.

Amid volatility in equity markets and consistent redemption, the number of close-ended schemes in the mutual fund industry saw a sharp rise in the last financial year, courtesy fixed maturity plans (FMPs). Fund houses registered a four-fold rise in the number of FMPs in 2010-11.

According to data from the Association of Mutual Funds in India (Amfi), the number of close-ended schemes reached 368, as against 202 last year, a jump of over 82 per cent. In contrast, the number of open-ended schemes could grow by 13 per cent only.

majority of the rise happened in the income category. The number of schemes more than doubled, registering growth of 134 per cent. “It is mainly on the back of the industry’s emerging favouritism for FMPs,” said an independent observer of the fund industry.

Says the chief investment officer of a medium-sized fund house, “There is no point investing in equities if you can earn similar, or even better, returns by investing in debt funds.”

With 456 schemes, the year surpassed the number of FMP launches in 2008-09, when the industry came out with 448 such products. Interestingly, after the October 2008 collapse of FMPs, the industry launched fewer FMPs in the succeeding year, mobilising a meager sum of Rs 24,026 crore, as against Rs 100 lakh crore in 2008-09.

However, according to data sourced from Morningstar India, a firm tracking the Indian fund market, fund houses mobilised Rs 1,13,416 crore through FMPs in 2010-11, well above the amount raised in 2008-09.

Dhruva Chatterji, research analyst at Morningstar, says, “In a rising interest environment, FMPs are the preferred investment option for debt investors. Further, high short-term interest rates add to their attractiveness as they are able to give higher yields.”

Generally, fund houses prefer the second half of a financial year for launching FMPs as investors can get double indexation benefits. Indexation benefits help lower the capital gains, thus lowering the tax outflow. In certain scenarios, by staying invested for a little more than a year and covering two financial years, the investor is able to get inflation indexation benefit for two financial years.

This was true for 2010-11 as well. Of the total FMPs launched, over three-thirds came in the second half, post September. With 134 launches, March recorded the maximum FMP launches in a single month ever, garnering assets worth Rs 28,000 crore.

Source: http://www.business-standard.com/india/news/close-ended-mutual-fund-schemes-seesharp-rise/433856/

Quantum MF Launches Quantum Gold Savings Fund

Quantum Mutual Fund has announced the launch of the “Quantum Gold Savings Fund”, an open ended fund of funds scheme which will invest predominantly in units of the Quantum Gold Fund (ETF).

The New Fund Offer opens on 28 April 2011 and will close on 12 May 2011. The scheme will reopen for continuous subscription on 26 May 2011.

The Quantum Gold Savings Fund enables investors to invest in the scheme through lump sum investment or Systematic Investment Plans (available after the scheme reopens).This fund addresses investors who wish to invest in gold, but do not have a Demat or trading account required for investing via Exchange Traded Funds (ETFs).

Commenting on giving investors some much needed respite from purity concerns, security issues and additional making charges and premiums by launching such an investment vehicle for gold, Chirag Mehta, Fund Manager - Commodities, said, “Gold has always been a much trusted investment avenue which works as a brilliant keeper of value. Even when the markets crashed in 2008, and the Sensex returns were in negative-52%, gold stood strong at 31% in INR valuation. Investors are increasingly recognizing this ability of gold to serve as a safe haven asset, but requisites like a Demat and Trading account often stop them short of investing in gold through convenient channels like ETFs. At Quantum, we believe investing is simple. And through the Quantum Gold Savings Fund we have attempted to launch a fund to ensure investing in gold retains its simplicity and cost effectiveness.”

Even though the Quantum Gold Savings Fund in turn invests in the Quantum Gold Fund (ETF), there will be no investment management fee charged in the Quantum Gold Savings Fund, so that investors do not have to bear the expenses for both the schemes. Thus presenting investors with a truly cost efficient option.

The scheme offers growth option.

The scheme would allocate 95% to 100% of assets in Units of Quantum Gold Fund. On the other side it would allocate upto 5% of assets in Money Market instruments, Short-term Corporate debt securities, CBLO and units of Debt and Liquid Schemes of Mutual Funds.

The minimum application amount is Rs 500 and in multiples of Rs 1 thereafter. The Mutual Fund seeks to collect a minimum subscription amount of Rs 25 lakh under the scheme during the NFO period.

Entry load charge will be nil for the scheme. Exit load charge will be 1.5% if redeemed or switch out on or before 1 year from the date of allotment of units.

The scheme's performance will be benchmarked against the domestic price of gold.

The fund manager of the scheme will be Mr. Chirag Mehta.

Source: http://www.adityabirlamoney.com/news/471380/10/22,24/Mutual-Funds-Reports/Quantum-MF-Launches-Quantum-Gold-Savings-Fund-

UTI MF Declares Dividend for Opportunities Fund

UTI Mutual Fund has announced the declaration of dividend on the face value of Rs. 10 per unit under dividend option of UTI Opportunities Fund. The record date for dividend has been fixed as 2 May 2011.

The quantum of dividend will be Rs. 0.80 per unit. The scheme recorded NAV of Rs. 14.97 per unit as on 25 April 2011.

UTI Opportunities Fund is an open ended equity oriented scheme which has the investment objective to generate capital appreciation and/or income distribution by investing the funds of the scheme in equity shares and equity related instruments. The main focus of this scheme is to capitalize on opportunities arising in the market by responding to the dynamically changing Indian economy by moving its investments amongst different sectors as prevailing trends change.

Source: http://www.indiainfoline.com/Markets/News/UTI-MF-Declares-Dividend-for-Opportunities-Fund/3664942358

Low-income investors shirk micro SIPs for high costs & complexity.

The initial enthusiasm of mutual fund houses to promote micro-systematic investment plan, or SIP, an investment route to attract low-income individuals to invest regularly in equities, is waning due to high costs and regulatory hiccups.

Higher costs to service such accounts without adequate growth in investor base had been deterring mutual funds from promoting this channel. Now, the Securities and Exchange Board of India's decision to make know-your-client, or KYC, norms mandatory for even investments of less than Rs 50,000 in mutual funds has hit the final nail in the coffin of micro SIPs.

SEBI had made it mandatory for every mutual fund investor to be KYC-compliant from January 1, in a move intended to check fraudulent practices and money laundering activities. To be KYC-compliant, an investor is required to submit valid identification documents. Earlier, only those individuals investing Rs 50,000 or more needed to quote their permanent account number, or PAN.

Now, the revised norms mean even low-income investors, investing smaller amounts in mutual funds through micro SIPs, also need to provide the required documents. Mutual fund officials and distributors said a majority of the investors opting for micro SIPs, mostly workers in the unorganised sector in the two and three-tier cities, do not have documents to complete the KYC procedure.

"Many low-income individuals look for convenience while investing, as they get intimidated by procedural challenges," said Surajit Mishra, national headmutual funds of Bajaj Capital . "Greater legal requirements have discouraged them from investing in mutual funds through micro SIPs," he said.

Many top asset management companies jumped the bandwagon to offer micro SIP services to grow their business in the largely untapped rural India, but soon found that the costs incurred in selling and servicing these accounts were prohibitively high, since the investor base was not registering substantial growth. The key to profitability in micro SIP accounts is volumes.

Currently, UTI Mutual Fund , Reliance Mutual Fund , SBI Mutual Fund , ICICI Prudential Mutual Fund , Sahara Mutual Fund and Birla Sun Life Mutual Fund offer the micro SIP facility. Schemes of some of these mutual funds accept as low as Rs 50 per month through micro SIPs. The minimum accepted amount under normal SIPs is usually Rs 500 per month. A majority of the fund houses lack distribution strength to cater to small towns across the country and are finding it difficult to garner more accounts.

The problem is compounded by distributors' refusal to push mutual fund products following the ban on entry loads, the fee that mutual funds charged investors to pay distributors, since August 2009. A top official with a large mutual fund house, which offers micro SIPs, said the breakeven period for a mutual fund selling micro SIPs could be at least five to seven years.

"Micro SIPs do not make sense at all for most mutual funds as profitability is a key issue here. The costs involved in selling them were a hindrance; now KYC rules have made buying mutual funds through this route more complex," said Dhirendra Kumar, chief executive of Value Research , a New Delhi-based mutual fund tracker.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/low-income-investors-shirk-micro-sips-for-high-costs-complexity/articleshow/8096214.cms

Smaller fund houses deliver higher returns

While size is much sought after in the mutual fund industry, it is the smaller fund houses which have actually delivered the best returns to investors in the past year.

Consider this. If one averages the returns across their equity schemes, Quantum Mutual Fund, Benchmark Mutual Fund and Daiwa Mutual emerge as the top performers over the past one year, managing returns of 13.4 per cent to 15.8 per cent. These funds are midgets, having under their fold only between Rs 125 crore and Rs 1,500 crore of assets. Their equity assets are lower.

Four other small houses including Mirae and Canara Robeco figure among the top 10 on returns, delivering returns in the range of 10-15 per cent. Top equity managers such as Reliance Mutual, Sundaram Mutual and SBI Mutual have in contrast delivered average one-year returns of 4-7 per cent on their schemes.

Consistency factor

Ranking all the fund houses by their one-year returns, only HDFC, Fidelity and UTI from the larger fund houses make it to the top 10 list. Even over a slightly longer timeframe of three years, smaller managers have fared well.

In fact, five out of the top 10 are small houses. Here again, HDFC and Fidelity among the larger houses delivered consistent returns.

Is it then correct to come to the conclusion that investors should bet only on schemes from smaller fund houses? Not necessarily.

Lacking variety

For one, many smaller fund houses have only a few equity schemes under operation, aiding their ‘averages'. Quantum and Mirae have two and three equity schemes under management respectively.

Two, not too many of these schemes may have a long enough record to judge performance. Most of flagship funds for these funds invest in large-cap stocks, which outperformed the broader markets over the last few years.

Correct size

Here JP Morgan's AMC too needs a mention as all three of its schemes have outperformed indices over the last one-year, but has lagged behind over longer timeframes.

But is managing a smaller number of funds the only way to better returns? It seems so.

Fidelity with just six funds and DSP Blackrock with 10 schemes under management have seen consistent performance from most of them. Of course HDFC with 14 schemes has seen 11 of those perform consistently over one- and three-year periods.

But with 17-21 schemes under operation, fund houses such as Sundaram, Tata, SBI, Birla Sun Life and Reliance have found it more challenging to deliver a consistent show across schemes. Only half of their funds have outperformed indices such as the Sensex, Nifty or BSE 100.

Source: http://www.thehindubusinessline.com/markets/stock-markets/article1763923.ece?css=print

Is it Time to Dump Your Fund?

What are the things to watch out for that could ring alarm bells that tell you it's the right time to exit a fund?

Your advisor might have told you which mutual fund schemes to buy and how much you should earmark out of your overall investment portfolio for each of the schemes. But did he come back calling at any time to tell you which of the schemes are not performing well, or about the ones where the future does not look bright? Most often, intermediaries don't bother to revert with the tip on when to prune your holding in a fund scheme or exit it fully. Maybe your advisor is avoiding you because he himself convinced you to buy the scheme, which doesn't look like a great investment now. So, an investor is left with the fait accompli of having to take the 'sell' call, whenever required, on his own. And in a dynamic and volatile environment it may not be an easy call to take. The triggers could be of a wide range. According to market experts, investors can look at whether the fund has been a consistent laggard, the developments within the fund house, the change in the character of the fund and its composition. A decision to exit the fund can also be taken based on the altered life-goals of a person. So, what are the things to watch out for that could ring those alarm bells that tell you it's the right time to exit a fund? Not always the past Wealth management experts say the decision to enter or exit a mutual fund can hardly be based just on a fund's performance in the recent past. "It involves greater science than just looking at the fund's returns," says Vishal Kapoor, general manager, wealth management India, Standard Chartered Bank. Past performance, more often than not, is not sustainable. For instance, infrastructure funds, at the helm during the bull run of 2007, fell flat after the financial crisis that began in late 2008 with many languishing in the bottom quartile today. UTI Infrastructure Fund, for instance has returned a negative 10% return in the last one year, compared to 72% gains it delivered in 2007. As an investor, it is important to know that different sectors outperform at different times. FMCG and pharmaceuticals, for instance, are known to be defensives and do well during recessionary phases. On the other hand, sectors such as capital goods and commodities do well during bull runs. "Although returns are the easiest way to gauge the performance of a fund, it shouldn't be considered in isolation, says Fahima Shaikh, assistant manager, products, IIFL. So, how do you decide whether your mutual fund portfolio needs refurbishing? The fund's consistency in returns, the fund's strategy and how it co-relates with your investment objective is what you should study," says Kapoor. In a race to the bottom? According to Kapoor, if your fund has consistently been among the bottom 25%, in terms of performance, in its category, for a year, it may be worthwhile to exit the fund. Analysts say, a fund's performance should always be compared to a benchmark such as the Sensex and to other funds in its category. This kind of comparative analysis gives a clear picture about the standing of the fund within its universe. For instance, when compared to the returns given by the Indian markets in the last one year, equity funds focused on international markets outperformed by a large margin. They delivered a return of 20% compared to 8% by the Sensex. The performance of Birla Sun Life's Commodities Precious Metal Fund when compared to its benchmark, the Dow Jones Precious Metals Index shows that for the period, January 2010 to January 2011, it has given a return of 25%, lower than the index which returned 36%. Although the fund has done better than Indian equities, the investor could look at better performing funds in the precious metals category. On the other hand, in the last one year (March 2010-February 2011) we have seen some of the worst performing funds from the JM Mutual Fund stable. JM Basic Fund -which will soon have two more funds from the same group merged into it-has delivered a negative return of 26% compared to 9% delivered by the BSE-200. The fund mainly invests in basic industries like power, industrial goods, metals etc, with the BSE-200 as its benchmark and falls in the same league as multi-sector funds such as Birla Sun Life Basic Industries Fund. The fund's consistency has somewhat been in doubt through various periods. During the bull runs of 2007 and 2009, the fund has been among the best performers but during the recent downturns it was one of the biggest losers.

HSBC Progressive Themes fund, too, is a laggard among its peers as far as returns of the last six months to two years are concerned. It gave a negative return of 13.22% in the last one year. Its peers include large and mid-cap funds such as DSP Opportunities Fund, which, according to Valueresearchonline, gave a return of 12% in the last one year.

Risk vs return

Analysts often use the Sharpe ratio which helps you gauge how much of the extraordinary returns generated by a fund are a result of extra risk taken by the fund manager. A higher ratio indicates that the investor is earning a good return despite low risk. Joseph Thomas, head, investment advisory and financial planning, Aditya Birla Money, however, prefers to measure a fund's consistency by looking at rolling returns, among other parameters.

For those not familiar with the term, 5-year rolling returns of a fund for a particular year are the average annualised returns of the last 5 years ending with the year for which returns are being calculated. Thomas also recommends schemes with a beta level of less than 1, the beta level representing the risk of a portfolio in comparison to the stock market risk.

Scrutinising the portfolio

"Another factor, often ignored is the portfolio of a fund or its strategy which is vital for assessing a fund's health," says Shaikh. According to her, investors must know how a fund has been constructed and what kind of stocks and sectors the fund is exposed to.

"If the investor is uncomfortable with the portfolio and feels it has deviated from the mandate, then he can decide to switch to other funds," she adds. Sometimes, funds change names or investment mandate to attract more customers or to get rid of a tag that didn't appeal to investors. For instance, JM Auto Sector Fund was re-christened as JM Mid Cap Fund and JM Healthcare Sector Fund became JM Large Cap in May 2009.

Also, during the technology boom of 1999, almost every fund house launched a technology fund or its variant, but when the bubble finally burst, funds had to either rename their schemes or alter the fund philosophy. In 2002, Tata IT Sector Fund, for instance, morphed itself into Tata Select Equity Fund which has a much broader mandate. Though the change has been good for the fund, it could be in sectors that are quite unrelated to what you had in mind. So, do be aware of such changes in a fund's portfolio and keep your investment in such funds on your watch-list.

Know the inside story

Typically, fund houses go through many changes in their lifetime. A change at the helm or a new fund manager may end up being detrimental to the health of your fund. This happens in organisations where the fund manager drives the investment decisions and thus, the returns. Other factors include a change in ownership of the asset management company, exit by existing shareholders or any other news or information which could cast doubts on the sustainability of the business venture, says Thomas.

Last but not the…

If there has been a change in your life goal, you need to re-evaluate your portfolio. This could happen when you have already achieved your goal of buying a house or your child's education. "It may be time to modify your portfolio, say, move to debt as you get closer to retirement," says Gaurav Mashruwala, certified financial planner.

And then there are times when the changing market trends can present alternative investment strategies that could work better for you. Adarsh Shamdasani, a long-term investor in the market, recalls the above-average returns that arbitrage funds posted 3 years ago. "One-year returns were in the range of 8-9% around 2007, with the added benefit of their being tax-free investments," she says. However, it didn't last too long. The reduced arbitrage opportunities in the market and increase in the number of funds chasing limited opportunities has led to a fall in average returns to 6.5%. Today, you are better off investing in a fixed deposit or a Fixed Maturity Plan (FMP), which offers better tax-adjusted returns. An FMP, for instance, is now yielding 9.5-10% for a one-year deposit, almost tax-free after adjusting the tax liability to inflation.

The size of a fund, too, can become a deterrent sometimes. Reliance Growth, for instance, became too big for the fund manager to handle and at one point it stopped accepting any fresh investments.

"When the fund is of a reasonable size, say, worth Rs. 1000-2000 crore, given the liquidity and depth of the Indian markets, it is more easily manageable but too big a size brings in difficulties with respect to meaningful modifications," adds Thomas. So, a constant review of the fund's size is a good idea, he says.

However, it may not pay to be over-cautious. Although constant portfolio review is absolutely necessary, one shouldn't get bogged down by daily tracking of one's investments, whether it is mutual funds or any other asset, says Kapoor of Standard Chartered Bank.

Source: http://www.indiainfoline.com/Research/Articles/Is-it-Time-to-Dump-Your-Fund/25547445

Kotak MF Declares Dividend for Emerging Equity Scheme

Kotak Mutual Fund has announced the declaration of dividend on the face value of Rs. 10 per unit under dividend option of Kotak Emerging Equity Scheme. The record date for dividend has been fixed as 29 April 2011.

The quantum of dividend will be Rs. 0.75 per unit. The scheme recorded NAV of Rs. 11.553 per unit as on 21 April 2011.

Kotak Emerging Equity Scheme is an open ended equity growth scheme which has the investment objective to generate long-term capital appreciation from a portfolio of equity related securities, by investing predominantly in mid and small cap companies.

Source: http://www.indiainfoline.com/Markets/News/Kotak-MF-Declares-Dividend-for-Emerging-Equity-Scheme/3660081733

Equity MF pullouts hit a high in 2010-11

With the markets remaining volatile for the best part of 2010-11, exits made by equity MF investors , who were wary of losing their gains, hit a record high. Redemptions or the money pulled out by investors from equity MF schemes have topped Rs 79,730 crore in fiscal 2011, the highest ever, data with the Securities and Exchange Board of India (Sebi) shows.

Interestingly, redemptions from equity schemes in 2010-11 is even higher than thatof 2007-08 when they took out Rs 79, 353 croreon theback of a sharp rise in the equity markets. Investors booked profits whenever the benchmark indices traded close to their all-time highs in fiscal 2011, analysis shows.

The 27.4% y-o-y rise in redemptions from equity schemes has also led to a sharp fall in folios or investor accounts. Equity MFssaw net outflows (difference between sales and purchases made by investors) of Rs 13,138.1 crore, Sebi data shows.

The folios held by investorsin equity MFschemesfell by over 18 lakh to 3.92 crore in 2010-11. Folios in equity schemes have fallen below the 4-crore mark for the first time in three years. Investors pulled out Rs 12,804 crore from equity MF schemes in September last year, about 50% more than the previous high hit in October 2007 when the markets started trading close to their all-time highs.

A lot of investors booked profits when the markets went up ; and the general apathy shown by agents in pushing productstosmall retailinvestors ever since the ban on entry loads came also resulted in high pullouts , industry officials say.

"The real impact of the ban on entry loads (on MF sales ) was felt in fiscal 2011," says Surajit Misra, national head, MFs, Bajaj Capital, a distribution platform for funds . "Retail (investor ) participation has been quite muted ," he says. With no big asset creation happening, the bottom line of fund houses would have taken a knock last fiscal , he says.

New investors are not coming in and big-ticket participants who entered the markets remained only for the short-term , say industry officials .

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/equity-mf-pullouts-hit-a-high-in-2010-11/articleshow/8062999.cms

IDFC MF Declares Dividend for Small & Midcap Equity Fund

IDFC Mutual Fund has announced the declaration of dividend under dividend option of IDFC Small & Midcap Equity Fund. The record date for dividend has been fixed as 29 April 2011.

The quantum of dividend will be Rs 1.50 per unit. The scheme recorded NAV of Rs 15.4885 per unit as on 20 April 2011.

IDFC Small & Midcap Equity Fund is an open ended equity fund which has the investment objective to generate capital appreciation from a diversified portfolio of equity and equity related instruments.

The scheme will predominantly invest in small and midcap equity and equity related instruments. Small and Midcap equity and equity related instruments will be the stocks included in the CNX Midcap index or equity and equity related instruments of such companies which have a market capitalization lower than the highest components of CNX Midcap Index.

The scheme may also invest in stock other than mid cap stocks (i.e. in stocks, which have a market capitalisation of above the market capitalisation range of the defined small midcap stocks) and derivatives. On defensive consideration, the scheme may also invest in debt and money market instruments.

Source: http://www.adityabirlamoney.com/news/470631/10/22,24/Mutual-Funds-Reports/IDFC-MF-Declares-Dividend-for-Small-Midcap-Equity-Fund-

Foreign MFs score better in garnering assets

Foreign players control a little over 10 per cent of the domestic fund market.

Foreign fund houses outperformed their domestic peers in terms of garnering assets in 2010-11.

In a year that saw the industry’s assets decline by over six per cent, foreign players saw a marginal slip of 1.7 per cent. On the other hand, local players were beaten harder as they lost over seven per cent of assets. This is in contrast with the dominant view that foreign players would be at the receiving end, in view of domestic majors commanding an established brand equity.

The top five players in the fund market are domestic and include Reliance MF, HDFC MF, ICICI MF, UTI MF and Birla Sun Life MF. They control close to 60 per cent of the market. However, barring Birla, all the other majors saw a dip in their assets. UTI, ICICI and Reliance were the top losers, with asset erosion of 16 per cent, nine per cent and eight per cent, respectively. LIC MF witnessed a drastic loss of 74 per cent during the year.

“Foreign fund houses are now being recognised by the Indian retail investors. Our brand building is also catching up fast with homegrown players. Going forward, there is better scope as penetration is abysmally low compared to the developed markets,” explains the chief executive officer of a foreign AMC having operations in India.

Currently, foreign players control a little over 10 per cent of the domestic fund market.

In absolute terms, close to Rs 50,000 crore outflowed from domestic fund houses’ kitty in FY11, while foreign players witnessed an erosion of just Rs 1,263 crore.

Major foreign houses in India include BNP Paribas, Franklin Templeton, Fidelity, HSBC, JP Morgan and Morgan Stanley, among others. Officials in foreign AMCs say investors want diversification in other world markets, too. “Since many of us have a global presence, we can help investors here get exposure outside India,” they add.

Puneet Chaddha, chief executive officer, HSBC Asset Management (India), says, “We have launched a Brazil fund and plan to come up with more such offerings soon. There is no doubt that it is good to remain invested in Indian markets. However, opportunities in other global regions should not also be overlooked and Indian investors are interested in such products”.

Arindam Ghosh, CEO of Mirae Assets, agrees. “Indian investors have taken into consideration the performance factor. We provided them diversified products such as a China Fund and it got a good response. Soon, we plan to launch similar products which will help investors diversify in different global territories,” he says.

Interestingly, in the first half of FY11, foreign houses had marched ahead with a rise of as much as 14 per cent in assets, even as domestic players were yet to move into the positive zone.

Source: http://www.business-standard.com/india/news/foreign-mfs-score-better-in-garnering-assets-/433486/

Birla Sun Life launches Gold ETF news

Birla Sun Life Asset Management Company (BSLAMC) has launched an open-ended gold exchange traded fund, Gold ETF that is scheduled to close on 9 May.

The ETF to list on BSE and NSE has a 15-day window with a minimum application amount pegged at Rs6000 and multiples of Rs2000 thereafter.

Investors have been offered the option to convert to physical gold provided by certain vendors.

In a bid to cash in on the spurt in gold prices led by the commodities rally, a number of Indian companies and mutual funds have been working on plans to launch new Gold ETFs. HDFC, a leading Indian private sector bank launched a Gold ETF scheme last year.

According to the company, the money raised would be invested in gold of 99.5 per cent purity sourced from refineries approved by the London Bullion Market Association.

After witnessing the strongest growth of 66 per cent in demand for the yellow metal in 2010 at 963.1 T on heavy demand for jewellery, India is now seeing a boom in investment demand in the yellow metal and silver.

India's first gold savings fund, Reliance Gold fund opened for subscription on 14 February and closed on 28 February. In the process it generated a record of Rs4000 crore for a new fund offer (NFO). Reliance received applications in excess of 2 lakhs.

Meanwhile, Kotak Mahindra Asset Management Company, also recently launched its 'Kotak Gold Fund'. The unique open ended fund allows investors to take exposure to gold without holding demat account.

India has 10 funds selling gold-backed securities, with combined assets of Rs44 billion, as on 31 March, according to data from the Association of Mutual Funds in India.

Source: http://www.domain-b.com/finance/insurance/birla_sun_life_insurance/20110425_gold_etf_2.html

Bank investments in mutual funds more than double

Investments made by banks in mutual funds soared in the fortnight ended April 8, on the back of improved liquidity.

According to the data released by the Reserve Bank of India(RBI), bank investments in instruments issued by mutual funds had more than doubled compared to the previous fortnight.

Bank investments in mutual funds were at Rs 111,279 crore on April 8 compared to Rs 47,638 crore as on March 25.

“Liquidity had improved in the first week of April as year-end pressures came off,” said a banking analyst at a domestic brokerage. Liquidity had sharply turned into the surplus mode in the first week of April.

According to analysts, excess funds that banks had picked up in order to dress their balance sheets towards the financial year end.

Source: http://www.business-standard.com/india/news/bank-investments-in-mutual-funds-more-than-double/433249/

Principal Pnb Long Term Equity Fund - Growth & Dividend Options to be Merged with Principal Emerging Bluechip Fund

Principal Mutual Fund has decided to merge growth and dividend options under Principal Pnb Long Term Equity Fund, an open ended equity scheme with respective growth and dividend options under Principal Emerging Bluechip Fund.

The notice period of exit option shall commence from 21 April 2011 and conclude on 20 May 2011.

The continuing unitholders of Principal Pnb Long Term Equity Fund as at the end of business hours on 20 May 2011, will be allotted units (basis the NAV of 20 May 2011) of Principal Emerging Bluechip Fund, in lieu of the value of their existing units in the Principal Pnb Long Term Equity Fund.

The said merger shall be effective post the closure of the business hours on 20 May 2011.

Source: http://www.adityabirlamoney.com/news/469884/10/22,24/Mutual-Funds-Reports/Principal-Pnb-Long-Term-Equity-Fund-Growth-Dividend-Options-to-be-Merged-with-Principal-Emerging-Bluechip-Fund

MF schemes' merger hits taxation hurdle

Mergers of mutual fund schemes are facing the tax roadblock, say market players. In the past couple of years, the Securities and Exchange Board of India (Sebi) has expressed its displeasure to fund houses over the existence of too many similar schemes. However, fund houses say the cost of merging is too high.

“Some of the fund houses have progressed on schemes' consolidation but it is not done in a major way. There are certain tax issues around it, such as STT and other tax structures,” says H N Sinor, chief executive officer of Association of Mutual Funds in India (Amfi).

Since there is a fresh issue of units in the merged scheme in lieu of units in the merging scheme, the transaction is treated as a transfer under Income Tax Act, 1961. “A merger involves the redemption of funds from one or more schemes (which are to be merged) and then purchase in the surviving scheme. As there is selling and buying involved in the transaction, it attracts STT, which can be a significant amount in many cases,” says the chief financial officer of a leading fund house.

Currently, the STT in mutual fund schemes' merger is 0.25 per cent of the value or Rs 25,000 on a turnover of Rs 1 crore. This is higher compared with STT of 0.125 per cent or Rs 12,500 on a turnover of Rs 1 crore charged in the delivery-based transaction in the cash market.

Another chief executive officer of a foreign fund house adds, “The STT for all such redemptions (during the notice period of 30 days prior to the date of merger from both the schemes) is normally borne by the AMC, as per the current industry practice.”

He further explains, “During the notice period (exit load-free period), if the investors of the scheme, which is to be merged, are not in agreement with the merger proposal, they have the option to redeem without any exit load being charged from them.”

But, if they choose to redeem before the date of merger, the tax implication is similar to any other normal redemption transaction, that is, a capital gains tax of 15 per cent in case the scheme has been held for less than a year, and STT.”

While the short-term capital gains tax is borne by the investor, the question is who should pay the STT? “Though as of now we are paying it, it should be paid by the AMCs, investors or the schemes,” adds the CFO.

Besides the cost factor, there are regulatory approvals that could slow down the process. The process of merging two or more schemes requires a no-objection clearance from Sebi. Following the clearance, the asset management company (AMC) has to make a declaration and allow investors in the source schemes (that are being merged) to exit within a month without any exit load.

The slow pace of the schemes' consolidation can be gauged from the fact that despite Sebi’s continued nudging, only six players have merged their schemes since January, 2010. Former Sebi Chairman C B Bhave had said last year, “If the industry throws over 3,000 schemes at investors, how can one expect them to make a choice?” He had also expressed concern over several schemes not even reaching a critical mass.

Source: http://www.business-standard.com/india/news/mf-schemes-merger-hits-taxation-hurdle/432971/