Value buys present across market spectrum: PVK Mohan, Principal PNB Asset Management

PVK Mohan, equities head, Principal PNB Asset Management, which manages about Rs 5,500 crore, has increased exposure to agro-based firms, pharmaceuticals, consumer-centric stocks and auto ancillaries as these sectors are better insulated from high interest rates and its impact on demand and profit margin.

Infrastructure and select real estate stocks are Mohan's contrarian bets, while he prefers to stay away from cement and banking shares. "There are value-buys across market spectrum. Themes like agriculture and related rural economy-linked industries can be a part of long-term play. There are buying opportunities in mid-cap pharma, consumer-related and auto ancillary space," he told ET.

Mohan manages Principal Growth Fund, Dividend Yield Fund, Tax Savings Fund, Balanced Fund and Conservative Growth Fund. He prefers well-managed and low-debt companies with stable operating margins at all market cycles. Also, he likes firms with low capital needs, operating in non-competitive spheres, with easy cash flows and which are at lower valuations due to negative Sectoral or market overhang. "Infrastructure, capital goods and auto ancillaries are rate-sensitive sectors, but there are contrarian opportunities present in these counters," he said.

"We've increased exposure to consumer, pharma and healthcare, but then we're cautious adding stocks at these levels. You don't get too much on the table with respect to valuation," he added. "We've some exposure to real estate companies...These are companies with manageable debt levels and have their project outside stressed markets like Mumbai and Delhi. We've not invested in commercial real estate," said Mohan. He has increased investments in companies such as ITC, TCS, L&T, Lupine, Torrent Pharma, Areva T&D and Chambal Fertilisers. He has reduced exposure to ICICI Bank, RIL, REC,OBC and HDFC. "At about 16 time’s forward price-to-earnings, Indian markets are commanding a wee bit higher valuation," he said.

"We're slightly higher than our median long-term average. If the market corrects 5-7%, it will be a good entry point for long-term investors," he said.

He expects companies to register 12-13% growth in the first quarter vis-a-vis 15-18% estimated by the broker community. Investors can start taking long-term bets on equities, he said.

Source: http://economictimes.indiatimes.com/markets/analysis/value-buys-present-across-market-spectrum-pvk-mohan-principal-pnb-asset-management/articleshow/9353440.cms

When Fund manager changes, Monitor the fund carefully

One of the things that worry the slightly evolved mutual fund investors is change in fund managers. By the time you figure out that some of the equity funds you have chosen are actually making good money, and that this was because of the actions of someone called a fund manager, you could be hit with the news that the fund manager is changing.

This is a bit of a problem. You see, unlike some funds in the more mature markets, the fund manager is not really a brand in India. People generally invest in a particular fund because it has done well. Or, if they are beginners, they are likely to invest because the fund company is a big brand like ICICI or HDFC or Reliance. At some point, those investors interested in learning how mutual funds work come to know that investment decisions for each fund are taken by a fund manager.

And then they hear a fund manager has changed. This happens a lot. Over the last 24 months alone, there have been 187 fund manager changes for equity funds. The total equity assets managed by the Indian fund industry is Rs2 lakh crore. Over the last 24 months, there has been a change in fund managers handling about Rs98,000 crore - almost half of the total industry.

Is this a problem? Is this something that investors should worry about? Unfortunately, the only reasonable answer is that it depends. It's actually quite hard to figure out quantitatively how much of an impact a change in a fund manager has had on a fund. All equity funds are managed within a context of their investment mandate, their institutional parentage and, obviously, the market conditions. Pin-pointing the exact impact of these factors and that of a fund manager is impossible.

There have been a few cases when a fund manager's exit has led to a slump in funds' performance. However, there have been some cases when a new fund manager has proven to be better than the old one. At the end of the day, there is little in it except to say that when a fund manager changes, investors have to be extra vigilant in monitoring their fund for any changes in performance.

That still leaves investors with the question of why is there such a flux. Why are there so many changes in the management of funds? One reason is that there is generally a lot of flux in all sort of skill based jobs in India. Like any other white-collar job in a growing industry (and especially in financial services), changing jobs is a major way of moving up in one's profession. It's unfortunate that the managements of fund companies are unable to create conditions in which this is not the case, but that's the way it happens.

The other issue is of good fund managers themselves moving up the ladder into marketing and general management jobs to move up in their professions. I've seen this happen time and time again in the fund industry. Once a fund manager gets a good track record, he seems to spend more and more time talking to investors (at least the bigger ones) than on proper fund management.

This is basically a selling job. Or, he's expected to start managing and mentoring junior fund managers, regardless of whether the junior is actually any good at it.

Eventually, he gets out of fund management altogether and becomes CXO, for some value of X. This is great for his career and the way most corporate careers work. However, perhaps fund management jobs should follow a different model, like that of surgeons may be. You don't hear of a good surgeon moving forward in his career by abandoning surgery and becoming a hospital administrator, do you?

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/analysis/when-fund-manager-changes-monitor-the-fund-carefully/articleshow/9351703.cms?curpg=2

Tata Mutual Fund parts ways with Credit Suisse as offshore fund management partner

Tata Mutual Fund has parted ways withCredit Suisse as its offshore fund management partner in May, an official spokesperson from the Indian asset manager told ET.

"The change is being effected on the basis of the fund manager's macro-economic and infrastructure outlook," the Tata MF official said. "We're in the process of reallocating funds... this change in fund manager has no bearing on our relationship with Credit Suisse or any other services provider," he said.

However, according to industry sources, the investment team of Tata MF was not happy with the contribution of Credit Suisse towards the overall performance of the funds.

Credit Suisse was managingTata MF's Growing Economies Infrastructure Fund and Indo Global Infrastructure Fund.

Credit Suisse officials declined to comment on the development.

This is not the first time that Tata MF has changed its offshore fund management partner. In 2009, it removed US-based asset manager Invesco Global citing poor fund performance. At that time, Invesco had invested a lion's share of the investible corpus in Chinese stocks that were undergoing a bearish trend.

The absence of an offshore fund manager has forced Tata MF to liquidate its foreign assets and hold large piles of cash in the two international funds.

As on June end, Tata Growing Economies Infrastructure Fund Plan A held 66% of its asset under management in cash. Plan B of the same fund, which has mandate to invest 35% of corpus in international securities, maintained about 35% cash levels. Tata Indo Global Infrastructure Fund, which has the mandate to invest 35% in overseas equities, held 27% cash on June end. Both the funds acted as feeder funds into Credit Suisse Emerging Markets Infrastructure Fund, which has generated 7.8% over the past one year.

Despite high cash-levels, Tata Growing Economies Infrastructure Fund (Plan A) has returned over 4% vis-a-vis infrastructure funds category returns of 16.4%. TataIndo Global Infrastructure Fund has generated minus 4.4% return against category returns of minus 8.4%. In terms of value, investors in Indo Global Fund are logging significant losses as net asset value (NAV) of the fund has been locked in a range of Rs 7 and Rs 8 for more than a year. Investors had invested in this fund at a notional NAV of Rs 10.

"From what we see, the domestic portion is weighing heavy on the performance of both funds. The Credit Suisse fund has generated decent returns over a year's time. The underperformance of domestic portion could be because of the bleak outlook on infrastructure sector," a fund researcher said.

According to fund distributors, several investors have redeemed their investments from both these funds. The assets under management of Indo Global Infrastructure Fund have fallen from Rs 2,359.40 crore as on December 2007 to Rs 858 crore last month. The asset base of Tata Growing Economies Infrastructure Fund has dipped from a high of 41 crore in October 2009 to Rs 28 crore in June 2011. Plan B of the same fund, at one point, had assets worth Rs 173 crore. The plan now has assets worth just about Rs 109 crore.

Source: http://economictimes.indiatimes.com/personal-finance/mutual-funds/mf-news/tata-mutual-fund-parts-ways-with-credit-suisse-as-offshore-fund-management-partner/articleshow/9353252.cms

India to allow foreign investment in mutual funds from August 1.

India will allow qualified foreign investors to invest up to $10 billion in domestic mutual funds from August 1, a senior finance ministry official said on Friday.

The government expects good inflows from qualified financial institutions into mutual funds in this fiscal year to March 2012, Thomas Mathew, joint secretary, capital markets at the finance ministry, told reporters on Friday.

The move to allow qualified foreign investors was first proposed by Finance Minister Pranab Mukherjee in the budget for the fiscal year that started on April 1.

At present, only foreign institutional investors and sub-accounts registered with the market regulator Securities and Exchange Board of India, and non-resident Indians are allowed to invest in Indian mutual fund schemes.

Source: http://articles.economictimes.indiatimes.com/2011-07-22/news/29803534_1_mutual-funds-foreign-investment-capital-markets