Old challenges, new Sebi chief

The new chairman of the capital market regulator, Securities and Exchange Board of India (Sebi), takes over on Friday and Thursday was the last day of C.B. Bhave who completed three eventful years. Finance ministry veteran and UTI mutual fund chairman U.K. Sinha has large shoes to fill and has two key challenges before him. His actions on two issues will give a pointer on what he will mean for the Indian capital market. The first is the issue of loads in mutual funds. Sebi was the first global regulator to remove the conflict of interest embedded in a mutual fund by making a mutual fund a no-load product. Distributors are now paid by the asset management company (AMC) out of its own money and directly by consumers as a transaction or advisory fee. The mutual fund industry—the banks, the corporate distributors and the AMCs— are looking for a quick reversion to the imposition of a load embedded in the price of a mutual fund and are working to get the new Sebi chief to see it their way. The lack of an organized consumer lobby, of course, does away with the reverse pressure. What Sinha decides on this will define how he views the future of the mutual fund industry.

The second area is his stance on the ongoing debate around ownership of exchanges, and the conflict between profitability and governance. MCX Stock Exchange (MCX-SX) has openly battled Sebi in its bid to set up a stock exchange that would compete with the National Stock Exchange (NSE) and the Bombay Stock Exchange (BSE). The battle has been fought overtly and covertly. The company has gone to court, written to the ministry of finance (MoF) to pass a direction to Sebi telling it to allow the setting up of the exchange. (Though regulators are independent, MoF has the authority to pass a “direction” to get regulators to do what the government wants. It is one of the measures of the last resort available to a finance minister to bring recalcitrant regulators in line.) The covert battle has been fought by seeking to influence public opinion by funding research papers, events, surveys and wall-to-wall advertising in the media.

Market participants watched in astonishment a company battle institutions by targetting individuals rather than the institutions.The new Sebi chief will have to decide whether it is the institution that is above the individual or the individual that will change the course of stock market history.

Source: http://www.livemint.com/2011/02/17211716/Old-challenges-new-Sebi-chief.html?h=B

Fund houses seek to cash in on popularity of ETFs

Several mutual funds houses are working overtime to launch exchange-traded funds, popularly known as ETFs, given their growing popularity among investors as well as the convenience and cost advantage they provide.

SBI Mutual Fund is working on equity-based ETFs while Motilal Oswal Mutual Fund, which launched two such products recently, is working on more equity-based ETFs. Axis Mutual Fund and Benchmark Mutual Fund are among the fund houses that have recently launched ETFs either based on equity or commodity.

There are already 25 ETFs listed on the Bombay Stock Exchange and National Stock Exchange offering investment opportunities in a basket of domestic or global equities and gold.

RS Srinivas Jain, senior vice president and chief marketing officer, SBI Funds Management, said, “We have a gold ETF. Now we are working on four ETFs and hope to launch them in future with regulator’s approval.”

“We as a organisation will focus on ETFs as it is more convenient and cheaper, and also one of the best ways to invest in equity markets,” said Nimesh Mehta, vice president and head - products, sales and distribution, Motilal Oswal Asset Management Company.

As compared to the traditional mutual fund products, ETF's fund management cost is lower. Investors pay only 0.75 per cent as compared to 2 per cent to 2.5 per cent in other mutual fund products.

Motilal Oswal has two equity-based ETF products in the market. MOST 50, which was launched in July last year, offers investment option in S&P CNX Nifty stocks. Motilal Oswal launched another equity-based ETF – MOST 100 this month.

“We are working on more such products and we filed draft offer document for another product – Nasdaq 100 with Securities and Exchange Board of India a month ago,” Mehta said.

Chokkalingam G, executive director and CIO, FCH Centrum Wealth Managers, expects more such products to hit the market by end of the year.

“Global indices based ETF offerings will remove the constraints that domestic investors right now may be facing with domestic equities not looking the best bet and developed market equities rallying since January 2011,” Chokkalingam said.

ETFs debuted on the Indian bourses in early 2007 with the launch of gold-based ETFs. Since then, its popularity is also on the rise.

With the debut of Axis Mutual Fund’s gold ETF, there are 9 gold-based ETFs to choose from for those who wish to take a call on the yellow metal.

Tarun Bhatia, director - capital markets, Crisil, said in a recent report that gold ETFs would see higher inflows in the coming months, and more mutual funds are likely to add gold ETFs to their bouquet of offerings.

Source: http://www.mydigitalfc.com/commodities/fund-houses-seek-cash-popularity-etfs-815

UTI Mutual Fund Appoints Executive Search Firm To Find Next Chairman

Indian asset manager UTI Mutual Fund said Thursday it has appointed an executive search firm to identify a new chairman to replace U.K. Sinha, who has been named head of the country's capital markets regulator.

The search firm will look at both internal and external candidates and the process is likely to be concluded soon, the state-run company said in a statement. It didn't name the search firm.

In the interim, a four-member committee will run the mutual fund. The committee comprises Jaideep Bhattacharya, chief marketing officer; I. Rahman, chief finance officer; Anoop Bhaskar, head of equities; and Amandeep Chopra, head of fixed income.

Source: http://www.automatedtrader.net/real-time-dow-jones/47496/uti-mutual-fund-appoints-executive-search-firm-to-find-next-chairman