Tata MF to launch retirement savings plan

Domestic mutual fund industry seems to be adopting newer ways to approach investors, in an under-penetrated market. Tata Asset Management Company (AMC) plans to bring its Retirement Savings Fund this week with an aim to meet the investment need of investors in different age brackets.

Early this year, Franklin Templeton AMC came up with family solutions schemes, to help investors plan their life goals, including retirement, child's future and wealth building. Sanjay Sachdev, president & CEO of Tata AMC, said, “With increasing life expectancy, the challenge is to maintain the same life style, post retirement. This fund is designed keeping in mind the young and middle aged working generation."

The new fund offer (NFO) from the basket of Tata AMC will be launched on October 7 and will remain open till October 21. It offers three options to investors — progressive plan, moderate plan and conservative plan — with varied percentage of equity and debt assets. For instance, the progressive plan is for investors below 45 years of age, with 85-100 per cent of funds allocation in the equity assets. Once the investor turns 45 he/she would be automatically switched to the moderate plan, where the equity allocation will come down to 65-85 per cent.

Thereafter, at the age of 60, investors will be shifted to the conservative plan, where fund allocations in debt assets will reach as high as 100 per cent. In short, a single scheme will turn out to be a debt scheme after being an equity scheme. According to Bhupinder Sethi, co-head, equities at Tata AMC, “The equity investment will be primarily in the large cap stocks with a mix of good mid-cap stocks."

Investors will also be given an auto systematic withdrawal facility which will ensure regular cash flows to them after they turn 60. They can choose options of either monthly withdrawal, which will be one per cent of the investment value as on date of completion of 60 years, or quarterly withdrawal of three per cent of the investment value. This regular cash flow will continue till the corpus lasts.

Source: http://www.business-standard.com/india/news/tata-mf-to-launch-retirement-savings-plan/451480/

India Infoline Asset Management Company launches IIFL Nifty ETF

India Infoline Asset Management Company is the latest to enter the mutual fund industry. Its first offering is an exchangetraded fund (ETF) called IIFL Nifty ETF. The fund will invest in securities that make up the S&P CNX Nifty Index, in the same proportion as the index.

The Nifty tracks the behaviour of a portfolio of bluechip companies, the largest and most liquid Indian securities.

Exchange-traded funds score on account of their low-cost structure when compared with actively managed fund. The IIFL Nifty ETF proposes to have one of the lowest cost structures in the industry with expense ratio capped at as low as 0.25%. Actively managed funds charge a fee of between 1% to 2.5% as expense ratio.

There are two things to look at in an exchange-traded fund. One is the size of the fund and the second is the tracking error. Tracking error tells us the difference in return between the actual fund and its benchmark.

Both these aspects can be gauged once the fund has been in existence for some time and has a track record. Hence, experts advise investing in such funds through the secondary markets, rather than in NFOs.

"The fund size should be big enough so that investors are not exposed to the moves of a single investor or a group of investors," says Vishal Dhawan, founder, Plan Ahead Wealth Advisors. Exchange-traded funds are popular in the global markets where they account for 5% of the industry.

In India, however, they are yet to pick up and account for merely 1% of the size of the industry. The IIFL Nifty ETF new fund offer (NFO) is open till October 12. Investors can either buy it during the NFO or from the NSE once it is listed 10 days after the NFO closes.

However, to buy it from the stock exchange, investors need to have a broking account as well as a demat account, which come at a cost.

Why invest: The fund has one of the lowest expense ratio of 25 basis points. The Goldman Sachs Nifty ETS has an expense ratio of 50 basis points.

Why not to invest: Since an ETF has no history, one cannot say with certainty what the tracking error will be. A high tracking error is not good for investors.

Source: http://articles.economictimes.indiatimes.com/2011-10-04/news/30242605_1_expense-ratio-exchange-traded-tracking-error

Tips for NRIs to invest in Indian mutual funds, stock market

Surojit Pandya, an India-born US citizen, wanted to invest in an Indian mutual fund scheme, but was told that the fund house does not accept investments from people residing in the US.

Most US-registered mutual fund companies which have India operations do not accept investments from Indians living in the US as they are bound by the cap on the number of non-resident investors they can take.

Regulators in some countries require fund managers to be registered with them if they are handling more than a certain number of accounts of their residents. For example, the Dodd-Frank Act of the US requires fund managers handling over 15 US-based investors to be registered with the US regulators and follow their rules. To avoid dual regulators, many fund houses have stopped taking investors from these countries.

For someone like Pandya, one way to invest in the Indian market is to opt for India-specific funds launched by US mutual funds or go for Indian mutual fund houses that allow US-based NRIs to invest in their schemes. But for millions of NRIs not residing in the US, investing in Indian stock markets or mutual funds is not a tough proposition.

As an Indian staying overseas, if you want to take advantage of the high growth back home, you can do so by investing in stocks and mutual funds by following some simple steps. Despite the recent dull phase in Indian equity markets, the country's economic prospects continue to be bright and its long-term growth story remains intact. But before we go ahead with the procedures for investment, it is important to know who according to Indian law is considered a non-resident Indian.

According to the Foreign Exchange Management Act (Fema), 1999, "an NRI is a person resident outside India who is either a citizen of India or a person of Indian origin (PIO)."

Fema further clarifies that a PIO is a foreign citizen of Indian origin residing outside India who has held an Indian passport at any time or who himself or his father or grandfather was a citizen of India.

The Income Tax Act further identifies the criteria for availing tax exemptions extended to NRIs.

HOW TO GET STARTED?
All investments made by NRIs have to be in local currency, that is, the rupee. Mutual funds in India are not allowed to accept investments in foreign currency. For investing in Indian mutual funds, therefore, an NRI needs to open one of the three bank accounts-non-resident external rupee (NRE) account, non-resident ordinary rupee (NRO) account or foreign currency non-resident account (FCNR)-with an Indian bank.

An NRE account is a rupee account from which money can be sent back to the country of your residence. The account can be opened with money from abroad or local funds. An NRO account is a non-repatriable rupee account. An FCNR account is similar to the NRE account, except for the fact that the funds are held in a foreign currency.

The amount that is be invested can be directly debited from an NRE/NRO account or received by inward remittances through normal banking channels. An NRI needs to give a rupee cheque or draft from his NRE/NRO account. He can also send a rupee cheque/draft issued by an exchange house abroad drawn on its correspondent bank in India.

If the investment is made through cheques or drafts, the investor should attach with the application form a foreign inward remittance certificate (FIRC) or a letter issued by the bank confirming the source of funds.

FIRC is a proof of payment received by the individual from outside the country in a foreign currency. It is issued by the bank where you have the account to receive the funds.

Other know-your-customer documents such as Permanent Account Number and address proof are also to be submitted, just as in case of resident investors.

POWER OF ATTORNEY
After you have made the initial investments, is it possible for you to keep track of your money and react to market movements that at times may call for additional purchases, switches or redemptions even as you are away?

Mutual funds allow a power of attorney (PoA) holder to take these decisions on your behalf. All that the PoA holder needs to do is to submit the original PoA or an attested copy of it to the fund house. The PoA should have signatures of both the NRI and the PoA holder. The PoA holders signature will be verified for processing any transaction.

Similarly, an NRI can make a resident Indian his/her nominee in the mutual fund scheme. An NRI can also be the nominee for investments made by a local resident. Fund houses also allow an NRI to have a joint holding with a resident Indian or another NRI in a scheme.

HOW TO REDEEM?
Redemption proceeds are either paid through cheques or directly credited to the investor's bank account. All earnings will be payable in rupees.

As mentioned earlier, investments made through inward remittances or from NRE/FCNR accounts are fully repatriable. Hence, earnings made by redeeming the units or through dividends are fully repatriable.

However, in case of investments made through NRO accounts, only the capital appreciation is repatriable, not the principal amount.

TAX LIABILITIES
While tax liabilities of an NRI investing in India are the same as that of a resident investor, tax is deducted at source in case of the former.

"The key difference between investment rules for NRIs and those for resident Indians in case of both MFs and stocks is tax deduction at source (TDS)," says Rajmohan Krishnan, executive vice president, regional head, North & South, Kotak Wealth Management.

But are NRIs subject to double taxation-once in India and again in the country of their residence? It depends on the country of residence. If the Indian government has a avoidance of double taxation treaty (ADTT) with that country, the NRI will be spared from paying tax twice.

According to Kavitha Menon, vice president, Wealth Management Group, Parag Parikh Financial Advisory Services, a number of countries have an ADTT with India.

"To give an example, India has an ADTT with the US. If an NRI based in the US makes short-term capital gains from equity investments in India, he pays 15% tax. However, the rate for such gains is 30% in the US. The investor will need to pay tax only for the difference in rate. This means he gets a deduction on the tax paid in India from his tax payable in the US.

EQUITY INVESTMENTS
NRIs can invest in Indian stock markets under the portfolio investment scheme (PIS) of the Reserve Bank of India (RBI). Under this scheme, an NRI has to open an NRE/NRO account with an RBI-authorised Indian bank. An individual open only one PIS account for buying and selling stocks.

Aggregate investment by NRIs/PIOs cannot exceed 10% of the paid-up capital in an Indian company and a PIS account helps the RBI ensure that the NRI holding in an Indian company does not cross that limit. Each transaction through a PIS account is reported to the RBI.

The next step is to open a demat account and a trading account with a Sebi-registered brokerage firm. An NRI cannot transact in India except through a stock broker.

NRIs cannot trade shares in India on a non-delivery basis, that is, they can neither do day trading nor short-sell in India. If they buy a stock today, they can only sell it after two days.

Short-selling is selling stocks that one doesn't own in expectation that their prices will drop, and buy them back at lower prices.

SUBSCRIPTION TO IPOs
Shares issued through initial public offerings (IPOs) are not covered under he PIS. In case of IPOs, it is the responsibility of the issuing company to inform the RBI the number of shares it is allotting to NRIs.

However, NRIs need NRE/NRO accounts to subscribe to IPOs. The shares acquired through IPOs can also be sold without a PIS account. However, NRIs must furnish their bank details, besides the date of allotment and cost of acquisition of the shares to calculate the tax on any gains they may have made.

Investing in India's long-term success story is not all that tough after all. All an NRI needs is a right bank account and other documents which even a resident investor will require to submit.

Source: http://businesstoday.intoday.in/story/tips-for-nris-to-invest-in-indian-mutual-funds-stock-market/1/18846.html

Equity funds post worst quarter in nearly three years

Diversified equity mutual funds posted their worst quarterly performance in nearly three years with rising interest rates, global economic slowdown and worries over the debt crises resulting in the fall of key stock indices.

Large-cap equity mutual funds have posted a sharp -9.6 per cent in returns in the quarter ended September this year, while returns on mid cap funds too fell at -7.5 per cent over the same period — their worst quarterly performance since the quarter ended December 2008.

Even as key mid-cap indices fell more than large- cap, returns on mid-cap funds have been marginally better than those of large cap funds. The CNX Mid Cap index fell 22.3 per cent, while the large cap indices BSE Sensex fell 18 per cent and BSE 100 fell 19 per cent since December 2008, according to research by Morningstar.

The benchmark sensitive index lost 12.7 per cent during the quarter ended September, while the BSE Mid Cap and BSE Small Cap indices lost 10.1 per cent and 14.9 per cent respectively.

According to data available with Morningstar, infrastructure funds continued their under-performance, and ended the quarter with an average loss in excess of 11 per cent. Banking sector funds were the biggest laggards during the quarter, losing an average 13.1 per cent, on the back of rising interest rates and concerns of deteriorating asset quality of banks. Both the technology sector and global funds lost close to 13 per cent during the period.

“Defensives such as FMCG sector funds were the only saving grace during the quarter, delivering an average return of 5.4 per cent. Healthcare sector funds also did not fall as much as other equity fund categories, and returned negative 6.7 per cent during the quarter. Over the past year FMCG and healthcare managed to deliver a positive return of 14.3 per cent and 2.6 per cent respectively, while other

equity fund categories dabbled with losses over the same period,” said Dhruva Chatterji, senior research analyst, Morningstar.

Source: http://www.indianexpress.com/news/equity-funds-post-worst-quarter-in-nearly-three-years/855863/0

How to keep in touch with your fund

Why bother to track your mutual funds (MF) once you’ve invested in them? You’d think it is your fund manager’s job to manage your money since he charges a fee from you for that. That’s true, but at the very least you must know the names of fund houses and schemes where you have invested. That may be a given to most of us, but you’d be surprised to know that many forget where they had invested their money and many don’t keep records of their investment.

Let’s look at the different ways you could get out of touch with your MF investments and how to get in touch with them again.

Losing touch

Scheme or fund house changes name: In 2011, when Rajkot-based Nitin Soni, 25, tried to dig up the records of a scheme he had invested in four years ago, he was lost. “I scanned the newspapers but could not trace any detail about my scheme or my fund house. I wanted to know the number of units that I had and my scheme’s latest net asset value; I kept going round in circles.” said Soni.

It turned out that he had invested in the erstwhile ABN AMRO​ Asset Management (India) Ltd that changed its name to Fortis Investment Management (India) Pvt. Ltd in November 2008 and eventually to BNP Paribas Asset Management India Ltd in October 2010. Both the name changes took place because the fund house’s international parent got acquired—on two separate occasions—by other foreign groups. So first it was a consortium of The Royal Bank of Scotland Group Plc, Fortis SA/NV and Banco Santander SA that acquired ABN AMRO. Later, BNP Paribas SA and a Belgium government owned company jointly acquired Fortis Bank SA/NV and the name of the Indian AMC changed, yet again, to BNP Paribas AMC.

Soni, obviously, had not kept a track of it nor did he keep an account of the communication sent to him by the fund house, presumably on both the occasions. Says Hiren Dhakan, associate fund manager, Bonanza Portfolio Ltd, a Mumbai-based financial services firm: “Name changes in the MF industry are very common. If the investor is unaware of this, it can be a nightmare for him to trace it without the help of an MF agent or a financial planner. Also, small-time agents may not be savvy enough to dig out this information as some of them may have just washed their hands of the scheme after pocketing their sales commissions.”

What should you do? Typically, names of MF schemes change when either their fund house is acquired by another fund house or when two or more schemes are merged. Whenever such a change happens, your fund house would send you a letter offering a grace period, usually a month’s time, to exit the fund house without paying an exit load, if any, if you do not subscribe to the change.

• Make sure you keep a track of such letters. If you choose to stay invested. All your future new account statements will reflect the changed name.

• If you come across your old investment certificates or account statements and can’t trace the name of the scheme, hit the Internet. More often than not, you should get some information about it that’ll help you trace it.

• If you don’t find success, get in touch with large-sized registrar and transfer agents (R&T; a fund house’s back office and record keepers) such as Computer Age Management Services Ltd (Cams), Karvy Computershare Ltd, Sundaram and BNP Paribas Fund Services. Instead of approaching 45 fund houses, it’s better approaching a few R&Ts.

• If you know an MF agent, request him to do some digging around.

Not updating your address: This one affects many of us. We migrate to large cities in search for better jobs. We stick around, grind it out for a few years and then we get offered a job in another city and we move. But our investments don’t follow us as we fail to inform our fund houses. As a result, our account statements keep reaching our old address. 

What should you do? 

If you are compliant with the know-your-client (KYC) norms, it’s very convenient to get your address changed. All you need to do is update your KYC records. Effective 1 January 2011, KYC has been made compulsory, irrespective of the amount you invest in an MF. Earlier, KYC was required only for investments worth at least Rs. 50,000.

• Visit www.cvlindia.com, the website of CDSL Ventures Ltd, a division of Central Depository Services (India) Ltd (CDSL), the nodal agency appointed to do KYC for MF investors.

• Under its “download” section, download the “KYC detail change” form, fill it, attach proof of your new address, your Permanent Account Number (PAN) card copy and visit any of the points of sale (PoS) terminals of CVL India.

• The list of PoS terminals is on the CVL’s website. Says Srinivas Jain, chief marketing officer, SBI Funds Management: “Most mutual funds are also PoS centres. Even if you are not a particular MF’s investor, you can still approach that fund house’s PoS and submit your request. We’ll do the needful.”

• Once CVL does your KYC change, it puts up the status on its website. On KYC’s website, click the link that says “Inquiry on KYC”. Submit your PAN and you get to see the date as on which the latest update (your address change request) has been affected.

• A senior fund house official told us on condition of anonymity that once the records get updated, fund houses send a letter to the investor at the new and the old addresses, informing about the change.

• But not all are lucky. Says Srikanth Meenakshi, director, FundsIndia.com, an Internet platform to buy and sell funds: “I had submitted my own KYC request change in August 2009; I had originally applied for it in July 2008. My KYC change was done but the CVL website doesn’t reflect the change.”

• Keep an eye on CVL’s website. If you don’t get to see the updated records, call up your fund house and check.

Not saving your account statements: Saving account statements is important as it helps you track your investments. The problem gets heightened in cases of investors who buy MFs purely from the point of saving taxes and invest in equity-linked saving schemes (ELSS) once a year and then forgetting about it. ELSS are equity-diversified schemes that offer tax deduction benefits under section 80C and come with a three-year lock-in period. “Due to the lock-in, people don’t bother to check their investments in the interim thinking that they wouldn’t be able to withdraw in any case,” says Dhakan. Bangalore-based financial planner Anil Rego says that not just do-it-yourself investors, but even some of his own clients forget about their investments. “They’d say ‘my financial planner is there, so why should I bother’.”

What should you do? Cams told us that they can dig out investors’ past records by using their PAN, if they have one. For investors who don’t have a PAN, typically R&Ts use two parameters, namely, first holder’s name, city and/or postal index number code. 

Keep in touch

Register your email address: One of the best ways to keep in touch with your MF investments is to register your email address with your fund house. Assuming your PAN is already registered, fund houses can send you account statements over email. Recently, Cams, Karvy and Franklin Templeton International Services (India) Ltd came together to give consolidated account statement across fund houses supported by either of these R&Ts.

Here as well, if you have a PAN and email (registered with fund houses at the time you had invested), then you can get a consolidated account statement (one statement of all your holdings across all fund houses serviced by these three R&Ts) over email.

How to register your email? The key is to register your email at the time of investing and filling the application form. If you haven’t done already, there is a way out. R&Ts like Cams provide a form (PAN-based service form) with a request to update email addresses.

Once you submit this form to the R&Ts, it will update all your folios (carrying your PAN as the first account holder) with your email address. Do this with all R&Ts that your fund house is attached to.

Rules on consolidated account statements: In a circular dated 8 September, the Securities and Exchange Board of India asked fund houses to issue consolidated statements. What Cams and Karvy are doing at present will now be replicated across the industry.

As per the new rules, you will get a consolidated account statement across all the folios where you have transacted, across all the fund houses. Even if you transact in different fund houses and those managed by different R&Ts, you will get all the details in a single statement. In folios where there is no activity, you will get account statements once in six months. 

Source: http://www.livemint.com/2011/10/04211507/How-to-keep-in-touch-with-your.html