Domestic funds' asset slips more than foreign MFs

Overseas funds' higher exposure to equity boosts AUMs.

Indian mutual fund houses have seen a higher drop in their AUMs this fiscal to date, than the foreign fund houses have, according to data available on the SEBI Web site.

As of December-end 2010, Indian mutual fund houses' average assets under management (AUM) fell by 10.4 per cent while that of foreign fund houses fell by 2.6 per cent. The industry average AUM, which stood at Rs. 6.74 lakh crore, for the same period saw a drop of 9.6 per cent.

Foreign fund houses account for about 11 per cent of the average AUM of the industry, and domestic fund houses 89 per cent. The proportion in terms of number of folios is also the same.

The foreign fund houses' average AUM totalled Rs 72,494.54 crore and that of the Indian fund houses Rs 60,1905.88 crore, both as at December end, 2010.

Of the 43 fund houses, 11 are foreign fund houses.

One reason for the difference in AUM fall between the two categories of fund houses is the liquidity tightness that this fiscal experienced. “Generally, foreign fund houses have more exposure to the equity side of the market than to the liquid side. This is why they saw a lesser drop in their AUMs as the equity markets performed better than the debt and money markets,” said Mr Surajit Misra, Executive Vice-President and National Head-Mutual Funds, Bajaj Capital.

The average AUM of Franklin Templeton - the largest foreign fund house in the country - increased by about 18 per cent for the period April-December, 2010. The AUM of the fund house rose to Rs 39,442.60 crore (as on December 31, 2010), from Rs 33,290.04 crore (March 31, 2010). Fidelity, the second largest foreign fund house, recorded a 15 per cent increase in AUM, which stood at Rs 7,683.91 crore (Rs 8,901.48 crore).

“During 2010, we consciously increased our focus on the fixed income side given the low retail participation in that segment.

As part of this strategy and our conviction about corporate debt, we had pushed two funds that included a new launch focused on accruals,” said Mr Harshendu Bindal, President, Franklin Templeton Investments (India).

Top-5 fund houses

Of the top five Indian fund houses in the country, UTI and ICICI Prudential mutual funds have fallen by 19 per cent each during this fiscal. While Birla Sun Life and Reliance Mutual Fund fell by 7.4 per cent, HDFC MF fell by just one per cent during the same period.

The year 2010 saw Shinsei mutual fund completely exiting the mutual fund business in India and selling it to Daiwa. The joint venture between Sundaram MF and BNP Paribas came to an end, with Sundaram continuing on its own and BNP Paribas taking over Fortis Mutual Fund.

AIG Global Investment Group Mutual Fund, owing to its efforts to cut costs and repay debt, has reportedly sold its Indian mutual fund business to Pinebridge Investments (an erstwhile AIG subsidiary).

Despite the struggling mutual fund industry in India, interest and the potential in the India growth story will keep foreign fund houses wanting to enter the industry. “However, many of these players will need to have a long term outlook given that margins are likely to be under pressure,” said Mr Bindal.

Source: http://www.thehindubusinessline.com/2011/01/26/stories/2011012650661400.htm

Sundaram’s Venkatesan Sees ‘Short-Term’ Headwinds for India

Jaya Rao Venkatesan, a fund manager at Sundaram Mutual Fund, which manages about $3.2 billion in assets, comments on India’s monetary policy and stock markets. He spoke by phone today.

India’s central bank increased the benchmark interest rate to a two-year high and signaled further gains in borrowing costs after raising its inflation forecast. Governor Duvvuri Subbarao lifted the repurchase rate to 6.5 percent from 6.25 percent, according to a statement from the Reserve Bank of India in Mumbai today. The decision was forecast by 21 of 22 economists in a Bloomberg News survey. One expected a half-point advance.

The Bombay Stock Exchange’s Sensitive Index, or Sensex, gained 0.2 percent to 19,189.25 at 12:21 p.m. in Mumbai.

On the rates decision:

“There was a lurking fear that rates could rise more. The increase is in line with expectations and to that extent the policy is positive for the markets.”

On the monetary policy:

“The central bank is trying to anchor inflation expectations but at the same time doesn’t want to disturb the growth dynamics. So, as of now, they are able to keep the fine balance between growth and inflation.”

On the outlook for stocks:

“I don’t think there is big positive or negative fallout from the policy for the markets.

“We continue to see short-term headwinds in terms of inflation, but the medium-term outlook for India remains unchanged.

“A rise in crude oil prices beyond $100 per barrel could severely impact the growth of the Indian economy.”

Venkatesan said the policy decision won’t change his investment strategy and he continues to favor consumption, healthcare and software stocks.

Source: http://www.bloomberg.com/news/print/2011-01-25/sundaram-s-venkatesan-sees-short-term-headwinds-for-india.html

In this season of charity, do it through mutual funds

When it comes to a discussion on investing in mutual funds (MFs), it is natural that we think about ourselves and our family. What if you are given a choice to think of others who deserve to enjoy their life in this world as much as you do? Can asset management companies (AMCs) help us with this?

Sample this: At least Rs16,000 crore have been raised through the World Food Programme (WFP) 2010, a part of the United Nations system, that fights hunger worldwide. This money has come from many countries—governments, private institutions, trusts and individual donors like you and me. The Indian government and its agencies have contributed close to Rs2,750 crore and we are currently ranked 30 in the overall donor standings. If I were to relate both these numbers to the Indian MF industry, it may seem like this—15 AMCs adding up their total asset size will still not match the total funds raised by WFP 2010; the Indian contribution alone will beat 16 AMCs in the league table of average assets under management.

What prompted me to write this column is essentially three things. One, this is a season of giving (and marathons)—riding on many resolutions that one has taken for the new year. Two, the recent addition to the big list of givingRs8,846 crore for charitable causes by Azim Premji, Wipro Ltd’s founder. We have also come across many other donations, including a sizeable one from Bill Gates, whose Bill and Melinda Gates Foundation has an asset trust endowment of $36.4 billion (around Rs1.64 trillion). And, finally, you and I may not be as well known to the world as the names in this paragraph, but that in no way dilutes the values we hold and the difference our combined contributions can make to the world we live in. Welcome to the world of charity funds.

What is a charity fund?

A charity fund, also widely known as donor-advised MF, allows you and me to make a charitable contribution. If the law wants to give further encouragement, it will create a tax exemption to these contributions. (In India, we have section 80G of the Income-tax Act that exempts as much as 100% of the donations you make to certain registered charities, subject to an individual upper limit of 10% of your adjusted gross total income. For deeper understanding, talk to your tax consultant.) The contributions we make can be invested into the market, based on the asset allocation we decide. We can chose between a high equity-biased asset allocation to a high fixed-income-biased asset allocation depending on how you want your money to sweat it out in the market and fund your noble cause.

Choose the cause: Now that you have put your money to work, the next logical step is to decide the purpose you want to support. Many charities are registered with the fund and we can search for detailed information of what they do and then decide to support them. For those people who give larger sums, these funds also extend customized solutions for giving. In India, a ready-made repository of such charities is available on the GiveIndia website.

So if some AMC does make up its mind to create a charity fund, there could be a ready-to-use pool of charities that are already KYC (know your charity) compliant, thanks to GiveIndia. All your grants, the ultimate use of your money and the status of your giving account can be tracked online.

Simple, clear and transparent

This finds relevance in our country in more ways than one. Today, all the giving that we do is actually giving out of our capital—a one-time payment that instantly gets consumed by a noble and charitable cause. We aren’t creating a capital account, the returns of which can fund such causes. AMCs can manage our capital to create more value and increase the corpus by riding on market returns, thereby helping more such causes. By doing so, the industry can attract many more investors, a noble cause can get served and for all you know, charity funds can emerge as a large category altogether. We, the investors, would have created a sustainable annuity fund for charitable causes with the help of AMCs.

Let me introduce you to three such funds that have been widely regarded for doing this in the US. The first such fund is Fidelity Charitable Gift Fund. Since its inception in 1991, the power of over 56,000 donors has matched about a third of the Gates’ foundation endowment. Yes, people like you and me have that combine power. There is also an active interest taken by financial advisers to guide their clients on chipping in money into the gift fund. The size of this single fund is almost as big as the fifth largest AMC in India.The second is Vanguard Charitable Endowment Program and the third Schwab Charitable. The former was set up in 1997, and the latter in 1999. If I add the grants that both these funds have been able to provide, the combined power of the common man has equalled that of Premji.

Give and make a difference to the world we live in.

Source: http://www.livemint.com/Articles/PrintArticle.aspx?artid=A1C4EC06-27E3-11E0-ADA3-000B5DABF636

Kotak 50 declares dividend

Kotak Mutual Fund has announced a dividend of 20% (Rs. 2.00 per unit on Face Value of Rs.10), under the dividend option of Kotak 50. The record date for the dividend as been fixed as January 27, 2011.

All investors registered under the dividend option of Kotak 50 as on January 27, 2011 will receive this dividend. The NAV of the scheme under the dividend option as on January 24, 2011 was Rs 32.554.

Kotak 50,is an open ended equity scheme. The investment objective of the scheme is to generate capital appreciation from a portfolio of predominantly equity and equity related securities. The portfolio will generally comprise of equity and equity related instruments of around 50 companies which may go up to 59 companies but will not exceed 59 at any point in time.

Source: http://www.moneycontrol.com/news/mf-news/kotak-50-declares-dividend_515871.html

Pramerica Mutual Fund Unveils Short Term Income Fund

Pramerica Mutual Fund has unveiled a new fund named as Pramerica Short Term Income Fund, an open ended income scheme. This scheme is a short-term investment option that provides the flexibility to counter a dynamic environment by actively managing its portfolio in line with the evolving interest rate scenario. The scheme will follow an active duration management strategy. The face value of the new issue will be Rs. 1000 per unit. The new issue will be open for subscription from 27 January and will close on 3 February 2011.

Pramerica Short Term Income Fund would invest 65% to 100% of assets in debt and money market instruments with residual maturity upto 3 years with low to medium risk profile. It would further allocate upto 35% of assets in debt and money market instruments with residual maturity not exceeding 5 years and 3 years with low to medium risk profile.

The investment objective of the scheme is to generate regular returns with moderate level of risk by investing primarily into a portfolio of debt securities and money market instruments of short term maturity.

The scheme shall offer two options - growth and dividend option.

The minimum application amount is Rs. 5000 and in multiples of Rs. 1 thereafter.

The fund seeks to collect a minimum subscription (minimum target) amount of Rs. 1 crore under the scheme during the NFO period.

Entry load charge will be nil for the scheme, while the exit load charge will be 0.25% for redemption / switch-out before 3 months from the date of allotment and Nil for redemptions / switches on or after 3 months from the date of allotment.

Benchmark Index will be CRISIL Short Term Bond Fund Index.

The scheme will be managed by Mahendra Jajoo.

Source: http://www.indiainfoline.com/Markets/News/Pramerica-Mutual-Fund-Unveils-Short-Term-Income-Fund/3507185913

SBI Magnum Equity Fund declares dividend

SBI Mutual Fund has announced a dividend of 35% (Rs. 3.50 per unit on Face Value of Rs.10), under the dividend option of SBI Magnum Equity Fund. The record date for the dividend as been fixed as January 28, 2011.

All investors registered under the dividend option of SBI Magnum Equity Fund as on January 28, 2011 will receive this dividend. The NAV of the scheme under the dividend option as on January 21, 2011 was Rs 32.540.

SBI Magnum Equity Fund is an open-ended growth scheme. The investment objective of the scheme is to provide the investor long term capital appreciation by investing in high growth companies along with the liquidity of an open-ended scheme through investments primarily in equities and the balance in debt and money market Instruments.

Source: http://www.moneycontrol.com/news/mf-news/sbi-magnum-equity-fund-declares-dividend-_515728.html