Sebi panel to review 2009 MF changes

The Securities and Exchange Board of India (Sebi) has formed a seven-member panel chaired by Prashant Saran, wholetime member, to examine the mutual fund sector’s grievances on the abolition of entry loads in August 2009. It had its first meeting on Friday.

K N Vaidyanathan, executive director, who heads the MF department at Sebi, is conspicuous by his absence in the committee, raising the industry’s hopes of a policy change. Vaidyanathan has been one of the strongest ambassadors and a strict enforcer of the no-loads regime that came into force under then Sebi chief C B Bhave.

FELT SIGNAL
U K Sinha, who took over as Sebi chairman in February, was one of the loudest critics of the Sebi moves when chairman of UTI Asset management. There was widespread speculation in the MF industry that Sinha’s assuming the office of regulator would bring relief. The formation of this committee and exclusion of Vaidyanathan from it are seen as clear moves in that direction. The industry claims to be suffering from loss of distribution force and erosion of assets under management.

According to two panel members, this committee has been formed with a specific mandate to look into post-August 2009 issues and should not be confused with the existing MF advisory committee.

Others on the panel are H N Sinor, chief executive of the Association of Mutual Funds in India; V Ganesh, CEO of Karvy Computershare Ltd; Dhirendra Kumar, CEO, Value Research; Narendra Mehta, investor grievances cell;, G Sethu of National Institute of Securities Markets, and S Ravindran, chief general manager-MF, Sebi.

Sinor refused to comment but has informed the fund houses of the new committee through an email. He said it would look into “sustainable and organised growth of the industry”. And, that it would discuss issues like transaction costs, single-cheque payment by customers, etc.

Amfi will take up issues with the committee from time to time, he said in the mail to fund houses.

A panel member said: “It’s very exploratory. A lot of people have complained about the transaction costs. This is making people disinterested and move out of the industry. So, the panel will look at ways to address these issues.” He said the findings are expected to come in a “few weeks.”

According to the him, the panel is clear that the advice and sales functions need to be kept separate. Another panel member termed it an effort to bring back entry loads through the back door.

OTHER ISSUES
Two key issues it would examine are the twin cheque system and the common account statements introduced by Sebi, with the associated transaction costs.

To distinguish the payment made to the distributor for his services, Sebi had mandated this be done separately. And, the regulator had pushed for a common account statement.

“We made our stand clear to Amfi that there should be a single cheque payment system. Even after two years of entry load ban, the distributors are finding it difficult to charge investors for the advice. We believe an investor should give a single cheque to the AMC and mention (overleaf) how much commissions he/she wants to pay to the distributors. A double cheque system only adds to the confusion,” said a CEO of a mid-sized fund house.

Source: http://www.business-standard.com/india/news/sebi-panel-to-review-2009-mf-changes/434166/

Bank of India to re-enter MF biz by early-2012

State-owned lender Bank of India today said it will be re-entering the mutual fund business by January 2012 and is presently in talks with multiple players for a strategic partnership for the venture.

The city-headquartered bank's Chairman and Managing Director Alok Misra said the bank hopes to seal the proposed joint venture by "end of second quarter" or September 2011.

"After 2-3 months (after September) we should start (operations)...say December or January we should start," Misra told reporters here, stating that the bank's network consisting of over 3,000 branches will help the new venture.

"We have been already selling other mutual funds through our branches and feel getting into it by ourselves will be beneficial," he added.

Misra, however, declined to share further details, merely saying that talks are on to get a "strategic partner". He parried the question when asked if the strategic partner would be a domestic or a foreign institution.

BoI, which according to media reports is looking for a majority stake in the JV, had first entered the MF industry in 1990 by launching six schemes but subsequently exited the business.

A majority of top lenders in the country, including SBI , ICICI and HDFC have a presence in the mutual fund or asset management company space and leverage on their respective networks to grow.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/bank-of-india-to-re-enter-mf-biz-by-early-2012/articleshow/8144515.cms

Better options for new investors in the diversified equity fund space

UTI Master Plus '91 (launched in 1991) is a diversified equity mutual fund scheme. Its asset size is less than Rs 1,000 crore and its average performance has made investor interest wilt.

PERFORMANCE: The scheme's returns have been at par with benchmark Sensex. In 2011, the scheme has returned -3.8%. In the last 12 months, it gained about 13.2%, outperforming 10% return of Sensex. In bullish 2007, the fund returned just about 47.5%, at par with Sensex. During the same period, diversified large-cap equity schemes gave more than 50% returns. In the meltdown year of 2008, the fund recorded a decline of about 54% in its net asset value against 52% fall in Sensex. It was among the bottom five in the category of diversified large-cap equity schemes. The fund did not attract much investor interest even in the recovery year of 2009. Despite Sensex having returned more than 81% and category average being more then 71%, UTI Master Plus '91 disappointed once again with 69%. In 2010, its performance was at par with Sensex. In the past five years, the fund has delivered a CAGR of about 7.6% against Sensex CAGR of more than 10%. However, investors who have been extremely loyal with the scheme, having stayed invested for more than 10 years, can feel good about the fact that the fund has returned a decent 20% CAGR during the period.

PORTFOLIO: Though benchmarked to the Sensex, the scheme's universe is not restricted to the 30 Sensex scrips alone. Moreover, most of its holdings are more than three years old, clearly yielding benefits of long-term holding. Some of these non-Sensex multibaggers include Union Bank of India , Aditya Birla Nuvo , Bharat Electronics , and Punjab National Bank . The fund maintains a longterm holding strategy with its portfolio with occasional churns. On the sectoral front, the fund has been pretty optimistic on financials for quite some time now as a majority of its older holdings belong to this sector. This includes stocks like ICICI Bank , Kotak Mahindra Bank , Indian Bank , PNB, IDFC , SBI and Union Bank. Surprisingly, Axis Bank and HDFC Bank are missing from its financial portfolio though the fund has exposure in HDFC. Other prominent sectors for the fund are energy, technology and automobile. As far as portfolio risk quotient is concerned, it currently commands a beta of 0.9 indicating that for every 1% rise or fall in the Sensex, the fund's returns are bound to rise or decline by about 0.9%.

OUR VIEW: As far as performance is concerned, the scheme not only lags peers, but also own funds like UTI Dividend Yield. There are better options for new investors in the diversified equity fund space while existing investors can consider switching to better performing funds from the same fund house.

Source: http://economictimes.indiatimes.com/features/investors-guide/better-options-for-new-investors-in-the-diversified-equity-fund-space/articleshow/8128582.cms