Sebi imposes 150 fee on new MF investments

Market regulator Sebi on Monday said new investors will now have to pay an extra Rs 150 for investment of Rs 10,000 and above in mutual funds, while the charge will be Rs 100 for existing investors.

"In order to enable people with small saving potential and to increase reach of mutual fund products in urban areas and smaller towns, it has been decided that a transaction charge per subscription of Rs 10,000 and above be allowed to be paid to distributors," Sebi said in a circular. Investors are already paying a commission in some cases, besides up to 2.5% of their investment towards expanses of fund management. Now the distributors would be allowed to charge Rs 100 as transaction charge per subscription. No charge can be made for investments below Rs 10,000. "As an incentive to attract new investors, the distributor may be paid Rs 150 as transaction charge for a first time investor in mutual fund," the circular added.

For systematic investment plans (SIPs), the transaction charges can be recovered in 3 or 4 installments, it added. Sebi further said that the investors would continue to pay upfront commission directly to distributors. Last month, Sebi chairman U K Sinha had said that transaction fee is some way to compensate the distributors, who may have lost interest in the distribution of mutual fund products.

Experts said this move is seen as back door imposition of entry load, a fee charged to the investors at the time of their investment in a MF scheme. MF distributors had been demanding re-introduction of entry load, which was abolished by Sebi in 2009. Then the board was headed by C B Bhave. Distributors have been complaining that their business has taken a hit since then.

Source: http://timesofindia.indiatimes.com/business/india-business/Sebi-imposes-150-fee-on-new-MF-investments/articleshow/9701665.cms

Investor interest in MF paints an optimistic picture

SEBI data shows net inflows all months except 2

Investor attraction for mutual funds appears to be in inverse proportion to the returns on the benchmark indices.

When the BSE Sensex was up 17 per cent in calendar 2010, equity funds saw net outflows of Rs 27,824 crore. This calendar, the Sensex has declined 12 per cent (year-to-date), and the same schemes have seen net inflows of Rs 3,211 crore.

Mixed views

The data, available on the SEBI Web site, follows an expected pattern, say analysts. They say it is a mildly optimistic sign. “After having been burnt in FY-09, investors started redeeming funds and booking profits in 2010. The market is now providing investors opportunities to enter,” said Mr Hiren Dhakan, Associate Fund Manager, Bonanza Portfolio.

This is also an indication of the increase in SIP investments, added analysts.

But not all fund managers share this view. Some are concerned that the mood in the market is not all that upbeat. “There is nervousness in the markets as seen by the high degree of volatility in July and August. Overall, the trend, according to distributors, has not been positive,” said Mr Arindam Ghosh, Head — Retail Sales, JP Morgan Asset Management.

SEBI data differs

“The popular adage goes that — Markets fall the very next day after the investors enter,” said Mr Dhakan.

However, SEBI data for the current calendar year shows net inflows into equity mutual funds for every month, excepting March and April.

Retail investors have become cautious and are showing lesser interest in sectoral and thematic funds including defensive bets such as FMCG and pharmaceutical funds, say people in the trade.

According to fund managers, Gold ETFs are gaining popularity among investors. In the calendar year so far, the assets under management of Gold ETFs have increased by 70 per cent from Rs 3,581 crore in January to Rs 6119 crore in July. In calendar year 2010, the AUM jumped by nearly 178 per cent from Rs 1,262 crore in January 2010 to Rs 3,516 crore in December 2010.

Rising from $1,113 an ounce on January 4, 2010 to $1,614 an ounce on July 29, on the London Bullion Market Association, gold as an asset class has returned 45 per cent in 19 months. This also explains the huge increase in the AUM of gold ETFs over this period in consideration, say experts.

Source: http://www.thehindubusinessline.com/markets/stock-markets/article2384369.ece

Sebi wants AMCs to keep an eye on big distributors

The Securities and Exchange Board of India (Sebi) has put the onus of regulating large mutual fund distributors on asset management companies. The regulator, in a circular on Monday, said mutual funds, before empanelling distributors, will have to ensure that the sales process of distributors is delinked from their customer-risk evaluation team.

The Sebi circular said distributors' advisory process should be different from the sales, while defining the principle of 'appropriateness' of products to customer categories. "Appropriateness is defined as selling only that product categorisation that is defined as best suited for investors within a defined upper ceiling of risk appetite," it said.

The distributor has to keep a record of a written communication of its advice to its client in case a product is not suitable for him, the circular said. "A customer confirmation to the effect that the transaction is execution only notwithstanding the advice of in-appropriateness from that distributor be obtained prior to the execution of the transaction," the regulator said.

Fund houses will also have to disclose, on their respective websites, the total commission and expenses paid to those distributors who have point of presence in more than 20 locations and have received commissions of over 1 crore on an annual basis across industry.

Besides, to help retail investors understand the performance of schemes in a better way, mutual funds will have to give point-to-point returns on a standard investment of 10,000 in addition to CAGR (compounded annual growth rate) for a scheme in existence for more than three years. "When the performance of a particular mutual fund scheme is advertised, the advertisement shall also include the performance data of all the other schemes managed by the fund manager of that particular scheme," Sebi said.

Source: http://economictimes.indiatimes.com/markets/regulation/sebi-wants-amcs-to-keep-an-eye-on-big-distributors/articleshow/9700944.cms

SEBI likely to raise PMS entry level to Rs 25 lakh

If you have Rs 5 lakh to Rs 25 lakh and have been entrusting this money to a portfolio manager, you may not have this luxury for very long if a SEBI proposal becomes a regulation.

SEBI in a concept paper has suggested that the minimum amount for investment under Porfolio Management Services (PMS) could be Rs 25 lakh, and not Rs 5 lakh, as it is at present.

So where will someone with Rs 5 lakh to Rs 25 lakh go for customised investment advice and services?

“Such a change will definitely affect people with these kind of sums to invest. They will have to invest in mutual funds,” said Mr Dinesh Thakkar, CMD of Angel Broking.

“Just going to a broker (and not under a PMS scheme) will not get the investor time and involvement that a portfolio needs. So the next route available is the mutual fund, where the money is managed by an expert,” he said.

Broking houses, in fact, fear that people with such sums to invest might fall prey to their own employees and franchisees' misguided or self-serving advice.

It is typical for people with Rs 5 lakh and Rs 10 lakh who do not want to invest in mutual funds to ask brokerage employees, or branch employees or franchisees for advice on what to buy and sell. “And these employees might unnecessarily churn their investments just to earn a bit of commission themselves,” said the managing director of a large broking firm.

“Under the PMS route, however, their porfolios would be centrally administered at the brokerage. There is a portfolio manager who is accountable, and whose incentives are linked to how well the porfolios do,” he said.

‘Killed by regulation'

Some brokerages say they are no longer growing their PMS business. “We do not take on any new clients for PMS,” said Mr Deven Choksey, head of KR Choksey Securities. This product, anyway, is being killed by regulation, he said.

“Firstly, PMS is not sold scheme-wise, but the reporting on it has to be done scheme-wise. Second, we can't customise the investment according to the risk profile of an investor as SEBI has capped investment in single securities.

“So if a doctor wants to put the bulk of his money in pharma and is willing to risk it, he cannot under PMS. If we are to function like a mutual fund, then what is the point,” he said.

Existing PMS customers are serviced, but new customers are given advisory services by his brokerage.

“The low minimum investment amount of Rs 5 lakhs makes these products (referring to PMS) accessible to retail investors without the protection which are available to retail investors under the mutual fund network,” said SEBI in its concept paper.

“To the extent that the services under this route resemble fund management instead of customised services, there is need to recognise and regulate them as private pool of capital,” says SEBI.

So, where funds are pooled they will have to be registered as Alternative Investment Funds, and where there is customised service for each portfolio this service will come under PMS.

Source: http://www.thehindubusinessline.com/markets/stock-markets/article2373456.ece

SBI Mutual Fund launches Gold Fund

SBI Mutual Fund has launched a new fund offer, SBI Gold Fund, an open-ended fund of fund scheme to enable investors to invest systematically in gold and gain advantage of the recent rally in the metal's prices.

The corpus collected from the NFO would be invested in SBI Gold Exchange Traded Fund.

"It is a convenient product and will give an opportunity to an investor to invest in the purest form of gold without the need of buying and storing physical gold, that too, without a dematerialised account unlike gold exchange traded funds," SBI MF Managing Director and Chief Executive Officer Deepak Chatterjee told reporters here.

He said there was a demand for ETFs and the assets under ETF schemes in the country crossed Rs 6,000 crore last month.

The minimum investment in the fund would be Rs 5,000. The new fund offer will open on August 22 and close on September 5, the fund house said.

The fund house will offer systematic investment plan too. SBI MF Chief Investment Officer Navneet Munot said, "Gold could show some volatility in future and hence the SIP route makes more sense. Looking at the current global economic conditions and stock market volatility, gold is a better option".

The fund house said the investors could avail gold loans from the country's largest lender State Bank of India for gold exchange traded funds.

At the end of June quarter, SBI MF managed assets worth Rs 47,874 crore. State Bank of India is the sponsor of the fund.

Source: http://articles.economictimes.indiatimes.com/2011-08-19/news/29905089_1_investment-officer-navneet-munot-physical-gold-gold-exchange